University of Miami Law School
Institutional Repository
University of Miami International and Comparative Law Review
10-1-1995
Actions Needed for Lifting the U.S. Trade Embargo
Against Cuba
Matias F. Travieso-Diaz
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Matias F. Travieso-Diaz, Actions Needed for Lifting the U.S. Trade Embargo Against Cuba, 3 U. Miami Int’l & Comp. L. Rev. 53 (2015)
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ACTIONS NEEDED FOR LIFTING THE U.S. TRADE
EMBARGO AGAINST CUBA
MATIAS F. TRAViESO-DAz*
I.
II.
OVERVIEW
THE DIRECT EMBARGO
A.
Express Embargo Provisions
1.
Introduction
2.
The Trading with the Enemy Act
3.
The Foreign Assistance Act of 1961
4.
The Cuban Democracy Act of 1992
5.
Cuban Assets Control Regulations
6.
The LIBERTAD Act
B.
Conditionsand Means for Removing the Express
Embargo Prohibitions
1.
Introduction
2.
Analogies to Other Countries
a.
China
b.
Rhodesia
c.
South Africa
d.
Summary
3.
The Trading with the Enemy Act
4.
The Foreign Assistance Act
5.
The Cuban Democracy Act
a.
Total Lifting of the Embargo
b.
Partial Lifting of the Embargo
c.
Removal of Other CDA Sanctions
d.
Economic Assistance
Partner, Shaw, Pittman, Potts & Trowbridge, Washington, D.C., J.D.,
Columbia University, 1976.
*
54
YEARBOOK OF INTERNATIONAL LAW
e.
f.
III.
[Vol. 3
Effect of the LIBERTAD Act
Summary
THE INDIRECT EMBARGO
A.
U.S. Economic Assistance Programsfrom which
Cuba is Excluded as a Result of the Embargo
1.
The Enterprise for the Americas Initiative
a.
Brief Historical Overview of U.S.
Programs to Foster Growth in Latin
America
b.
Free Trade Agreements
c.
Investment Programs
d.
Official Debt Reduction
2.
The Caribbean Basin Initiative
a.
Duty-free Entry into the United
States of Eligible Products from
CBI Countries
b.
Guaranteed Access Levels for
Apparel
c.
Bilateral Investment Treaties
d.
The Puerto Rican Caribbean
Development Program
i.
Section 936 Funds
ii.
Production Sharing
Operations
iii.
CaribbeanBasin Projects
Financing Authority
iv.
Technical Assistance
Programs
e.
U.S. Government Procurement of
CBI-Country Goods
f.
Special Treatment in Enforcement
of U.S. Trade Laws
3.
Other Economic Assistance Programs by
Agency
19951
U.S. TRADE EMBARGO AGAINST CUBA
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
B.
IV.
U.S. Agency for International
Development
Overseas Private Investment
Corporation
U.S. Department of Commerce
Department of Agriculture
Export-Import Bank
Small Business Administration
U.S. Trade and Development
Agency
U.S. Department of Labor
Peace Corps
U.S. Information Agency
Inter-American Foundation
Removing the Indirect Consequences of the
Embargo
1.
The Enterprise for the Americas Initiative
2.
The Caribbean Basin Initiative
3.
U.S. Agency for International Development
Programs
4.
Overseas Private Investment Corporation
5.
Generalized System of Preferences
6.
Agricultural Trade Development and
Assistance
7.
Export-Import Bank
8.
U.S. Assistance Programs Without Specific
Restrictions
9.
Potential Effect of the LIBERTAD Act
CONCLUSIONS AND RECOMMENDATIONS
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YEARBOOK OF INTERNATIONAL LAW
[Vol 3
I. OVERVIEW
Anyone familiar with the history of relations between the
United States and Cuba in the last thirty years is aware that the
United States has in place a strict embargo on trade with, and on
economic assistance to, Cuba. Many people are not aware,
however, of the full reach of the embargo, and the way it operates
to exclude Cuba from programs initiated by the United States which
provide economic benefits to other Latin American and Caribbean
nations. Also, few people know that, because of the accumulation
of increasingly prescriptive laws, lifting the embargo could require
multiple actions by both the Executive and Congress. Some of
these actions are capable of swift implementation, while others may
involve a process that could extend over months or years. The
purpose of this paper is to describe the actions that the U.S.
government would need to take to lift the Cuban trade embargo.
This paper is not intended to express any views on whether the
embargo should be lifted or modified under current conditions.
II. THE DIRECT EMBARGO
A.
Express Embargo Provisions
1.
Introduction
The United States has in place a comprehensive embargo
against trade and other economic transactions involving Cuba. The
embargo is expressly founded on three major statutes and is
implemented by the Cuban Assets Control Regulations, issued and
administered by the U.S. Department of the Treasury [hereinafter
Treasury].'
1.
Embargo-related prohibitions against activities relating to Cuba are
sprinkled throughout the U.S. laws. For example, 18 U.S.C. § 951 requires
agents of foreign governments, acting in the United States, to notify the U.S.
Attorney General of their agency relationship or face potential criminal sanctions.
1995]
U.S. TRADE EMBARGO AGAINST CUBA
2.
The Trading with the Enemy Act
The Trading with the Enemy Act of 19172 [hereinafter
TWEA] was enacted as the United States entered World War I. It
was intended to give the President authority to prohibit, limit, or
regulate trade with hostile countries in times of war.
Section 5(b) of the TWEA was amended in 1933 to grant the
President authority to exercise the powers of the Act during periods
of national emergency. As amended, section 5(b) of the TWEA
reads:
Persons engaged in lawful commercial transactions are not subject to this
requirement, except that commercial representatives of Cuba and other countries
who pose threats to the national security interests are not exempt, and must give
notice of their status.
Another example can be found in the Foreign Operations, Export Financing,
and Related Programs Appropriation Act of 1994, Pub. L. 103-87, 107 Stat. 931
(1993). Section 507 of this statute, which appropriates funds for a variety of
assistance programs covering military, economic, and developmental aid,
provides:
[n]one of the funds appropriated or otherwise made available
pursuant to this Act shall be obligated or expended to finance
directly or indirectly any assistance or reparations to Cuba..
• . Provided, that for purpose of this section, the prohibition
on obligations or expenditures shall include direct loans,
credits, insurance and guarantees of the Export-Import Bank or
its agents. 107 Stat. 946.
Provisions such as these will not be addressed in this paper, since they
constitute relatively minor impediments to trade that can be removed in due
course as the legislation is updated. Such revisions are now underway with
respect to Russia and the countries in Eastern Europe, which once were, and in
some instances still are, subject to many of the same restrictions that apply to
Cuba.
2.
Trading with the Enemy Act of 1917, 40 Stat. 411 (1917).
3.
Emergency Banking Relief Act of March 9, 1933, ch. 2, § 2, 48 Stat. 1
(1933), 50 U.S.C. app. § 5 (current version codified at 12 U.S.C. § 95a).
58
YEARBOOK OF INTERNATIONAL LAW
[Vol. 3
During time of war or any other period of national
emergency declared by the President, the President
may, through any agency that he may designate, or
otherwise, investigate, regulate, or prohibit, under
such rules and regulations as he may prescribe, by
means of licenses or otherwise, any transactions in
foreign exchange, transfers of credit between or
payments by banking institutions as defined by the
President, and export, hoarding, melting, or
earmarking of gold or silver coin or bullion or
currency, by any person within the United States or
any place subject to the jurisdiction thereof; and the
President may require any person engaged in any
transaction referred to in this subdivision to furnish
under oath, complete information relative thereto,
including the production of any books of account,
contracts, letters or other papers, in connection
therewith in the custody or control of such person,
either before or after such transaction is completed.
Whoever willfully violates any of the provisions of
this subdivision or of any license, order, rule or
regulation issued thereunder, shall, upon conviction,
be fined not more than $10,000, or, if a natural
person, may be imprisoned for not more than ten
years, or both; and any officer, director, or agent of
any corporation who knowingly participates in such
violation may be punished by a like fine,
imprisonment, or both. As used in this subdivision
the term "person" means an individual, partnership,
association, or corporation. 4
4.
Id.
19951
U.S. TRADE EMBARGO AGAINST CUBA
The legislative history is vague about the purposes behind
the 1933 amendment to Section 5(b) of the TWEA. 5 However,
interpretations of the intent of the legislation have been provided by
the courts and legal scholars. In 1971, for example, the Second
Circuit noted:
[Petitioner contends that the policy behind the
TWEA] is to deny hard currency to blocked
countries and their nationals. However, as the
Secretary [of the Treasury] points out, the purpose
behind the Act is not only that but also to preserve
the assets of such countries and their nationals for
possible vesting and use in the future settlement of
American claims against those governments and
their citizens.6
In a later case, the Ninth Circuit articulated the purpose
behind section 5(b) as follows:
The governmental interests which arguably justify
the blocking provisions of the TWEA and the
Regulations are threefold: (1) to prevent designated
countries from acquiring dollars; (2) to provide a
fund from which United States citizens could be
compensated for injury occasioned them by
5.
The 1933 amendment was debated and passed by both houses in a single
day, without hearings, and before the bill was even in print. J. B. BINGHAM,
TRADING WITH THE ENEMY:
LEGISLATIVE AND EXECUTIVE DOCUMENTS
CONCERNING REGULATION OF INTERNATIONAL TRANSACTIONS IN TIME OF
DECLARED NATIONAL EMERGENCY 158 (1976).
6.
Cheng Yih-Chun v. Federal Reserve Bank of New York, 442 F.2d 460,
465 (2d Cir. 1971).
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YEARBOOK OF INTERNATIONAL LAW
[Vol 3
designated countries; and (3) to use the blocked
funds as a negotiating tool with the designated
country. 7 (citations omitted).
The statements by the courts in these two cases, and a
number of others, reflect the historical fact that the TWEA has been
used as a political and economic tool to further the U.S.
government's positions in its dealings with unfriendly nations.
The 1933 amendment to section 5(b) was enacted in
response to an economic emergency, but its authority was later
invoked in connection with the Korean War, a military emergency.'
On December 16, 1950, President Truman issued a proclamation9
that took note of "recent events in Korea and elsewhere" and
referred to "the increasing menace of the forces of communist
aggression" as requiring the declaration of a state of national
emergency. 10 During this time, section 5(b) of the TWEA read in
7.
Tran Qui Than v. Regan, 658 F.2d 1296, 1305 (9th Cir. 1981), cert.
denied, 459 U.S. 1069 (1982).
8.
Proclamation No. 2914, 15 Fed. Reg. 9029 (1950), reprintedin 1950
U.S.C. Cong. Serv., Vol. 1 at 1557-58.
9.
Id.
10. President Truman's proclamation of a national emergency with regard to
the worldwide threat of communist aggression was effectively rescinded by the
National Emergencies Act, Pub. L. 94-412, 90 Stat. 1255 (1976). This
legislation provided that all outstanding declarations of national emergency would
become void in two years, except where the'President extended the state of
national emergency with respect to a particular country.
Congress expressly provided for the application of the National
Emergencies Act in a 1977 amendment to the TWEA. War or National
Emergency-Presidential Powers, Pub. L. No. 95-223, 91 Stat. 1625 (1977). The
1977 amendment to the TWEA required the President, within two years of
enactment of the National Emergencies Act, to extend any orders relating to
national emergencies that he wanted to keep in effect. In order to further extend
laws relating to a TWEA emergency, the President was also required to issue an
annual determination that the extension was in the national interest. See infra
19951
U.S. TRADE EMBARGO AGAINST CUBA
relevant part:
(1) During the time of war or during any other
period of national emergency declared by the
President, the President may, through any agency
that he may designate, or otherwise, and under such
rules and regulations as he may prescribe, by means
of instructions, licenses, or otherwise
(a) investigate, regulate, or prohibit, any transactions
in foreign exchange, transfers of credit or payments
between, by, through or to any banking institution
and the importing, exporting, hoarding, melting, or
earmarking of gold or silver coin or bullion,
currency or securities, and
(b) investigate, regulate, direct and compel, nullify,
void, prevent or prohibit, any acquisition, holding,
withholding,
use,
transfer,
withdrawal,
transportation, importation or exportation of, or
dealing in, or exercising any right, power, or
privilege with respect to, or transactions involving,
any property in which any foreign country or a
national thereof has any interest, by any person, or
with respect to any property, subject to the
jurisdiction of the United States."
Immediately following President Truman's proclamation, the
Secretary of the Treasury issued a set of regulations imposing a
total embargo on unlicensed financial and commercial transactions
notes 16 and 17, and accompanying text.
11.
Trading with the Enemy Act of 1917, 40 Stat. 411 §5(b) (1917).
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YEARBOOK OF INTERNATIONAL LAW
[Vol 3
between U.S. nationals, Communist China, and North Korea.12
These regulations are known as the Foreign Assets Control
Regulations [hereinafter FACR]. "
The FACR were the first detailed regulations promulgated
to impose a trade embargo on a foreign country under Section 5(b)
of the TWEA. The FACR later served as the model for regulations
issued in 1963 which imposed a trade embargo on Cuba. When the
Treasury issued the Cuban embargo regulations, it invoked section
5(b) of the TWEA as a basis for imposing the embargo.' 4
U.S. courts have upheld the President's exercise of the
powers granted by the TWEA, and the promulgation of regulations
by the Treasury under the President's delegation of those powers.
The U.S. Supreme Court has recognized that Section 5(b) of the
TWEA gave the President broad authority to impose comprehensive
embargoes on foreign countries, such as Cuba, both during
peacetime emergencies and in time of war.15
In 1977, Congress limted this broad presidential authority
through its amendment of section 5(b) of the TWEA by striking out
"during any other period of national emergency declared by the
President" in the text preceding subparagraph (a).' 6 In doing so,
Congress removed the President's ability to invoke the existence of
a national emergency and impose a trade embargo against a foreign
12. President Roosevelt delegated to the Secretary of the Treasury the authority
granted to him by the TWEA to the extent of empowering the Treasury to issue
implementing regulations. Exec. Order No. 9193, 3 C.F.R. 1174, 1175 (1942).
13.
Foreign Assets Control Regulations, 31 C.F.R. Pt. 500 (1950).
14. President Kennedy imposed a complete trade embargo on Cuba by means
of a Presidential Proclamation on February 3, 1962, invoking his authority under
section 620 (a) of the Foreign Assistance Act of 1961. See infra note 28, and
accompanying text.
15.
Regan v. Wald, 468 U.S. 222, 225-226 (1984).
16.
Pub. L. 95-223, 91 Stat. 1625 (1977).
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U.S. TRADE EMBARGO AGAINST CUBA
country pursuant to the TWEA. 7 However, instead of requiring
the President to declare a new national emergency in order to
continue embargoes such as the one in place against Cuba,
Congress grandfathered existing exercises of the President's
"national emergency" authority.' 8
Continued applicability of this
provision requires annual determinations that the exercise of such
17. In the same bill that amended section 5(b) of the TWEA, Congress enacted
new legislation authorizing the President to exercise essentially the same powers
as those granted by section 5(b), but restricting the exercise of those powers only
"to deal with any unusual and extraordinary threat, which has its source in whole
or substantial part outside the United States, to the national security, foreign
policy, or economy of the United States, if the President declares a national
emergency with respect to such threat." International Emergency Economic
Powers Act [hereinafter IEEPA], Tit. II, § 202(a), Pub. L. 95-223, 91 Stat.
1626, 50 U.S.C. § 1701(a) (1977). The President is also required "in every
possible instance" to consult with Congress prior to exercising his IEEPA
authorities, and once such authorities have been exercised, to report to Congress
every six months on the actions taken and any changes in underlying
circumstances. Id. at § 1703.
18. Id. at § 101(b), 91 Stat. 1625, 50 U.S.C. app. § 5.
provides:
Section 101(b)
Notwithstanding the amendment made by subsection
(a), the authorities conferred upon the President by section 5(b)
of the Trading with the Enemy Act, which were being
exercised with respect to a country on July 1, 1977, as a result
of a national emergency declared by the President before such
date, may continue to be exercised with respect to such
country, except that, unless extended, the exercise of such
authorities shall terminate (subject to the savings provisions of
the second sentence of section 101(a) of the National
Emergencies Act) at the end of the two-year period beginning
on the date of enactment of the National Emergencies Act.
The President may extend the exercise of such authorities for
one-year periods upon a determination for each such extension
that the exercise of such authorities with respect to such
country for another year is in the national interest of the United
States.
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YEARBOOK OF INTERNATIONAL LAW
lVol. 3
authority, with respect to each affected country, is in the national
interest of the United States.
The authority under the TWEA to maintain a trade embargo
on Cuba is predicated on the annual determination by the President
that continued exercise of TWEA authority with respect to Cuba is
in the national interest. Presidents Carter, Reagan, Bush, and
Clinton have issued annual determinations that extended the state of
emergency with respect to Cuba since the imposition of this
requirement.19 The most recent determination, issued by President
Clinton, extends the state of emergency until September 14, 1996. 0
3.
The Foreign Assistance Act of 1961
The Foreign Assistance Act of 1961 [hereinafter FAA],21
was enacted "to give vigor, purpose, and new direction to the
foreign aid program."' Congress viewed the FAA as an integral
part of the U.S. foreign policy of promoting the development of the
"southern continents. "23 Through the FAA, Congress undertook to
give continuity and direction to the many aid programs already
operating in this area. 24
While Congress was setting out to provide coordinated
assistance to other nations by enacting the FAA, it also sought to
deny assistance to Cuba and gave the President specific authority to
19.
50 U.S.C. app § 5, notes (1995).
20.
Presidential Determination No. 95-41, Sept. 8, 1995, 60 Fed. Reg. 47659
(1995).
21.
Foreign Assistance Act, 22 U.S.C. § 2151 et seq. (1961).
22.
S. REP. No. 612, 87th Cong., 1st. Sess. (1961), reprinted in 1961
U.S.C.C.A.N. 2472, 2473.
23.
Id. at 2475-76.
24.
Id. at 2475-78.
19951
U.S. TRADE EMBARGO AGAINST CUBA
impose a trade embargo on Cuba32 Section 620(a), which has been
part of the FAA since its original enactment, provides:
(1) No assistance shall be furnished under this
chapter to the present government of Cuba. As an
additional means of implementing and carrying into
effect the policy of the preceding sentence, the
President is authorized to establish and maintain a
total embargo upon all trade between the United
States and Cuba.
(2) Except as may be deemed necessary by the
President in the interest of the United States, no
assistance shall be furnished under this chapter to
any government of Cuba, nor shall Cuba be entitled
to receive any quota authorizing the importation of
Cuban sugar into the United States or to receive any
other benefits under any law of the United States,
until the President determines that such government
has taken appropriate steps according to international
law standards to return to United States citizens, and
to entities not less than 50 per centum beneficially
owned by United States citizens, or to provide
equitable compensation to such citizens and entities
for property taken from such citizens and entities on
or after January 1, 1959, by the government of
Cuba.
The legislative history of section 620(a) is sketchy; however,
this provision apparently arose from a desire by Congress to
respond to Cuba's expropriation of the assets of U.S. citizens. 6
25.
Foreign Assistance Act, 22 U.S.C. § 2370(a) (1961).
26.
President Kennedy's failure to impose sanctions against Cuba fueled
Congressional resolve to enact embargo legislation. Moreover, recent events,
including Castro's pursuit of the spread of Communism throughout Latin
66
YEARBOOK OF INTERNATIONAL LAW
[Vol 3
Remarks about fighting the spread of Communism are also scattered
throughout the debate on the FAA, often including references to
section 620(a). For example, Senator Kuchel, addressing the
worldwide threat of Communism, stated:
Mr. President, the bill is designed also, as I have
indicated in reading the language in the first section
of the bill, that the aid and assistance from the
people of the United States will be confined to free
peoples, to those countries which are not Communist
dominated nor subject to Communist influence. I
ask unanimous consent that the text of the report at
page 22 with respect to section 620 be set forth in
full at this point in my remarks. [Text of section
620 follows.]
Thus the language of the report prevents any
assistance under this act to the present government
of Cuba. It provides, in the words which the Senate
previously approved that, unless the President
determines a country is not dominated or controlled
by international communism, no assistance of any
kind shall be furnished to the government of any
such country.2 7
President Kennedy invoked the authority granted to him by
the FAA to declare a trade embargo against Cuba in a proclamation
which cited the FAA as authority for prohibiting "the importation
into the United States of all goods of Cuban origin and all goods
imported from and through Cuba," and directed the Secretary of
America, also provided the political climate necessary to include anti-Cuba
legislation in the FAA.
27.
107 CONG. REC. S17705-06 (Aug. 31, 1961) (statement of Sen. Kuchel).
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U.S. TRADE EMBARGO AGAINST CUBA
Commerce "to continue to carry out the prohibition of all exports
from the United States to Cuba. "28
Section 620(a) of the FAA is still in effect, and provides an
alternative source of authority for the Department of the Treasury's
regulations implementing the Cuban embargo. In fact, early cases
cite the FAA as the statutory authority for the Cuban embargo
regulations .29
In 1962, Congress reinforced the denial of assistance to
Cuba by adding subsection (f) to section 2370 of the FAA, in which
it withholds assistance to all communist countries.'
The new
provision states in relevant part:
(1) No assistance shall be furnished under this
chapter, (except section 2174(b) of this title) to any
Communist country. This restriction may not be
waived pursuant to any authority contained in this
chapter unless the President finds and promptly
reports to Congress that: (a) such assistance is vital
to the security of the United States; (b) the recipient
country is not controlled by the international
Communist conspiracy; and (c) such assistance will
28. Proclamation No. 3447, 27 Fed. Reg. 1085, 3 C.F.R., 1059-63 Comp.,
p. 157 (1962). Previously, authorization had been suspended for most industrial
export licenses to Cuba. 43 DEPT. STATE BuLL. 715 (1960). The President also
reduced the quota of Cuban sugar in the U.S. market to zero in 1960.
Proclamation No. 3383, 25 Fed. Reg. 13131 (1960) (effective Dec. 21, 1960).
Additional trade restrictions were imposed by other laws enacted in the 19601962 period. Therefore, by the time President Kennedy proclaimed a total
embargo, trade between the United States and Cuba was essentially cut off.
29. See American Documentary Films, Inc. v. Secretary of the Treasury, 344
F. Supp. 703, 707-8 (S.D.N.Y. 1972); R.C.W., Supervisor, Inc. v. Cuban
Tobacco Company, Inc., 220 F. Supp. 453, 463 (S.D.N.Y. 1963).
30. Foreign Assistance Act of 1962, Pub. L. No. 87-565, 76 Stat. 255 (1962)
reprintedin 1962 U.S.C.C.A.N. 312, 319-20, as amended Pub. L. 102-511, 106
Stat. 3355 (1992).
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YEARBOOK OF INTERNATIONAL LAW
[Vol 3
further promote the independence of the recipient
country from international communism.31
The provision also contains a list of Communist countries to
which the Act applies. While the list has been amended over the
years (most recently in 1992), Cuba has always been on it.
Subsection (h), added as part of the 1962 amendment to the
FAA, complements subsection (f) by providing that:
The President shall adopt regulations and establish
procedures to insure that United States foreign aid is
not used in a manner which, contrary to the best
interests of the United States, promotes or assists the
foreign aid projects or activities of the Communistbloc countries.'
Similarly, subsection (e),33 which covers countries that have
nationalized or expropriated United States property, reinforces the
specific sanctions imposed against Cuba in subsection (a) and
provides requirements that reproduce essentially those included in
subsection (a)(2).
Taken as a whole, the various provisions in Section 620 of
the FAA evidence a strong Congressional resolve to deny any form
of U.S. assistance to foreign countries, including Cuba, as long as
those countries remain under Communist rule. There has been no
recent indication of a change in this position by Congress.
4.
The Cuban Democracy Act of 1992
In 1992, Congress enacted legislation intended to promote
31.
Id.
32.
Id.
33.
22 U.S.C. § 2370(e) (1962).
19951
U.S. TRADE EMBARGO AGAINST CUBA
a peaceful transition to democracy in Cuba. This legislation was
signed into law by President Bush on October 23, 1992, and is
known as the Cuban Democracy Act of 1992 [hereinafter CDA].34
The CDA contains a statement of the United States' policy
towards Cuba, and announces, for example, its goal "to seek a
peaceful transition to democracy and a resumption of economic
growth in Cuba through the careful application of sanctions directed
at the Castro government and support for the Cuban people," and
"to maintain sanctions on the Castro regime so long as it continues
to refuse to move toward democratization and greater respect for
35
human rights. ,
In pursuit of these policies, the CDA imposes additional
limitations on trade with Cuba, contained in sections 1704-1708.3
Section 1704 is directed at countries receiving assistance from the
United States such as the republics of the former Soviet Union, and
it authorizes the President to impose economic sanctions (in the
form of denial of economic assistance and ineligibility for debt
reduction or forgiveness) against countries that provide economic
assistance to Cuba.'
Section 1705 of the CDA authorizes the donation of food,
medicines, and medical supplies to nongovernmental organizations
or individuals in Cuba, as well as the export of medicines and
medical supplies to Cuba, the latter subject to certain limitations. 38
Also subject to verification by the United States government are
export items to ensure that they are used for the purposes for which
34.
Cuban Democracy Act, 22 U.S.C. § 6001 et seq. (1992).
35.
Id. § 6002.
36.
Id. §§ 6003-6007.
37.
Id. § 6003.
38. No export is allowed where there is reasonable expectation that the items
will be used for purposes of torture, or for the production of biotechnological
products, or for reexport. Id. § 6004.
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YEARBOOK OF INTERNATIONAL LAW
[Vol 3
they were intended, and only for the use and benefit of the Cuban
people. 39 This section also permits telecommunications services
between the United States and Cuba, subject to certain limitations,
and direct mail service to and from Cuba.
Section 1706 terminates the ability of foreign subsidiaries of
United States companies to trade with Cuba. 4 This section also
prohibits entry into the United States to vessels that have entered
Cuba to engage in trade in goods or services within the preceding
180 days, and bans altogether the entry of vessels carrying Cuban
goods or passengers. 4 ' The section also instructs the President to
establish strict limits on remittances to Cuba for the purpose of
financing the travel of Cubans to the United States.42
The CDA institutes what has been recently called a "twotrack" policy with regard to Cuba. 43 One track is the continued
sanctions against the Cuban government. Another track is the
promise of United States help to Cuba once the island has
undertaken a transition to democratic rule. This second track of the
policy is embodied in Section 1707, which allows for the provision
of food, medicine and medical supplies to Cuba for humanitarian
purposes, if the President "determines and certifies to the
Committee on Foreign Affairs of the House of Representatives and
the Committee on Foreign Relations of the Senate" that the
government in power in Cuba:
39.
Id. § 6004.
40.
Id. § 6005.
41.
Id. § 6005(b)(2).
42.
Id. § 6005(c).
43.
Richard Nuccio, one of the key architects of the CDA and currently
Special Advisor to the President and the Department of State on Cuba, has
recently reaffirmed the Clinton Adminisration's commitment to the two-track
policy set forth in the CDA. See Cynthia Corzo, Adviser Change--But Not
Enough--in Cuba, MiAMI
HERALD,
Sept. 9, 1995, at 14-A.
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U.S. TRADE EMBARGO AGAINST CUBA
(1) has made a public commitment to hold free and
fair elections for a new government within 6 months
and is proceeding to implement that decision;
(2) has made a public commitment to respect, and is
respecting, internationally recognized human rights
and basic democratic freedoms; and
(3) is not providing weapons or funds to any group,
in any other country, that seeks the violent
overthrow of the government of that country.'
Similarly, section 1708(a) of the CDA permits waiver of the
sanctions listed in section 1706 should the President determine and
report to Congress that the government of Cuba:
(1) has held free and fair elections conducted under
internationally recognized observers;
(2) has permitted opposition parties ample time to
organize and campaign for such elections, and has
permitted full access to the media to all candidates in
the elections;
(3) is showing respect for the basic civil liberties and
human rights of the citizens of Cuba;
(4) is moving toward establishing a free market
economic system; and
(5) has committed itself to constitutional change that
would ensure regular free and fair elections that
meet the requirements of paragraph (2).4'
Section 1708(b) further provides for the following actions
"with respect to a Cuban government elected pursuant to elections
described in subsection (a)":
44.
Cuban Democracy Act, 22 U.S.C. § 6006 (1992).
45.
Id. at § 6007(a) (1992).
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(1) to encourage the admission or reentry of such
government to international organizations and
international financial institutions;
(2) to provide emergency relief during Cuba's
transition to a viable economic system;
(3) to take steps to end the United States trade
embargo of Cuba. 46
The conditions listed in Sections 1708(a) and (b) of the CDA
provide specific requirements and timetables for the President's
lifting of all or part of the Cuban trade embargo.
Those
requirements are examined in Section B below.47
5.
Cuban Assets Control Regulations
As noted previously, President Roosevelt delegated to the
Secretary of the Treasury the powers granted to him by section 5(b)
of the TWEA. The Secretary, in turn, delegated his authority to the
Treasury's Office of Foreign Assets Control [hereinafter OFAC]. 8
Since that time, OFAC has been responsible for issuing,
interpreting, and applying the embargo regulations.49
In 1963, OFAC published a comprehensive set of
regulations implementing the Cuban trade embargo, known as the
46.
Id. at § 6007 (1992).
47. The CDA also identifies the Department of the Treasury as the chief
agency given authority to enforce the legislation, and amends the TWEA by
empowering the Treasury to impose civil penalties of up to $50,000 and
forfeitures of property for violating the CDA's prohibitions. 22 U.S.C. § 6009
(1992).
48.
Treas. Dept. Order No. 128 (Rev. 1), (Oct. 15, 1962).
49.
See 31 C.F.R. §§ 515.801-515.809.
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U.S. TRADE EMBARGO AGAINST CUBA
Cuban Assets Control Regulations. ° The CACR have been
challenged a number of times, and in most instances, have been
upheld by the courts. 5 The CACR parallel the Foreign Assets
50. 28 Fed. Reg. 6974 (codified at 31 C.F.R. § 515) (1963) [hereinafter
CACR]. The CACR have been amended a number of times. On June 29, 1993,
the OFAC published regulations amending the CACR to incorporate several of
the CDA provisions, 58 Fed. Reg. 34709 (1993). The amendments reflect the
CDA's prohibition on the issuance of licenses for most trade between third
country subsidiaries of U.S. companies, impose a prohibition on the entry into
the United States of vessels touching Cuban ports, and add civil penalty
authority.
On August 30, 1994, OFAC published additional regulations:
revoking the general authorization permitting cash remittances
to Cuba, except to facilitate lawful immigration; revoking
general authorizations for persons to engage in travel-related
transactions in Cuba for purposes of family visits and
professional research; and significantly restricting the general
authorization incorporating the authorization contained in the
General License GIFT, administered by the Department of
Commerce, to limit the permissible contents of gift parcels
eligible for exportation to Cuba to medicine, food and strictly
humanitarian items.
59 Fed. Reg. 44884 (1994). Some of these measures, however, were recently
modified or revoked pursuant to a new Presidential policy, under which licenses
for professionall research-related travel to Cuba are liberalized, general licenses
are established to permit travel to Cuba to visit close relatives in family
emergencies, educational exchanges for Cuban and U.S. scholars are authorized,
specific licenses for the establishment of news bureaus in the U.S. and Cuba may
be granted, and licenses are allowed for activities of human rights organizations
to provide aid to dissident individuals and organizations in Cuba. 60 Fed. Reg.
54194 (1995).
51. See, e.g., Regan v. Wald, 104 S. Ct. 3026 (1984); Miranda v. Secretary
of Treasury, 766 F.2d 1 (lst Cir. 1985); Sardino v. Federal Reserve Bank of
New York, 361 F.2d 106 (2d Cir. 1966), cert. denied, 385 U.S. 898 (1966). In
recent cases, the Treasury's authority to issue additions or modifications to the
CACR have been upheld under the statutory authority of the TWEA, not the
FAA. See American Airways Charters, Inc. v. Regan, 746 F.2d 865, 867
(D.C. Cir. 1984); De Cuellar v. Brady, 881 F.2d 1561, 1562 (1lth Cir. 1989),
74
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Control Regulations on which they are modeled. In essence, they
prohibit all unlicensed financial and commercial transactions by
Americans with Cuba or its citizens. They serve the functions of
isolating Cuba, protecting Cubans from having their assets in the
United States confiscated by Cuban authorities, preserving Cuban
assets for future disposition, and denying Cuba access to dollar
earnings and dollar financial facilities. 52 A brief summary of the
CACR provisions follows.
The regulations prohibit the export to Cuba, either directly
or through third countries, of any U.S. products, technology or
services, except for publications and other informational materials,
cert. denied, 498 U.S. 895 (1990). See also Walsh v. Brady, 927 F.2d 1229
(D.C. Cir. 1991); Capital Cities/ABC, Inc. v. Brady, 740 F. Supp. 1007, 1008
(S.D.N.Y. 1990); Cemuda v. Heavy, 720 F. Supp. 1544, 1546-47 (S.D.Fla.
1989). In a leading Supreme Court case construing the CACR, Treasury relied
solely upon TWEA authority for defending the regulations at issue. Regan v.
Wald, supra note 15, at 3029. In its brief in Wald, the Government explained the
advantages of TWEA authority:
The Cuban Assets Control Regulations also are issued under the
authority of the Foreign Assistance Act of 1961, 22 U.S.C. §
2370(a), which authorizes the President to establish and maintain
a total embargo on all trade between the United States and Cuba.
However, TWEA authority is of primary importance because it
provides for various enforcement tools, such as subpoena power,
mandatory record keeping, and criminal penalties, and permits
the blocking or "freezing" of assets and control of certain
financial transactions unrelated to trade that might not be
reached under the Foreign Assistance Act of 1961. Regan v.
Wald, 104 S. Ct. 3026, Pet.'s Brief at n.8 (1984).
The Wald Court also observed that "the Foreign Assistance Act does not
provide criminal penalties for violations of the regulations promulgated under it.
TWEA does so provide." Regan v. Wald, supra note 15, at 3029.
52. S. L. Sommerfield, TreasuryRegulations Affecting Trade with the SinoSoviet Bloc and Cuba, 79 Bus. L. 861, 868 (1964).
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U.S. TRADE EMBARGO AGAINST CUBA
and telecommunications services and attendant equipment.53
Likewise, goods or services of Cuban origin may not be imported
directly or through third countries into the United States, except for.
up to one hundred dollars worth of Cuban merchandise which may
be brought into the United States by authorized travelers,
publications or other informational materials, and paintings,
drawings, and sculptures less than $25,000 in Vialue. 54 The CACR
also prohibit buying from, or selling to, Cuban nationals, whether
they are physically located in Cuba, or doing business elsewhere on
behalf of Cuba. The prohibition also extends to individuals or
organizations anywhere in the world who act on behalf of Cuba.
The CACR impose a total freeze on Cuban assets, both
government and private, and on financial dealings with Cuba. All
property of Cuba and Cuban nationals in the possession of U.S.
persons is blocked. Blocking imposes a complete prohibition
against transfers or transactions of any kind involving blocked
53. 31 C.F.R. §§ 515.201, 515.206 (1963). On July 22, 1993, the U.S.
Department of State wrote a letter to the Chairman of the Federal
Communications Commission announcing a new, liberalized telecommunications
policy towards Cuba. The new policy is intended to implement the
telecommunications provisions of Section 1705(e) of the Cuban Democracy Act,
22 U.S.C. § 6004(e) (1992), which authorize "telecommunications facilities in
such quantity and of such quality as may be necessary to provide efficient and
adequate telecommunication services between the United States and Cuba."
Letter from United States Department of State, Bureau of International
Communicationand InformationPolicy, to James H. Quello, Chairman, Federal
Communications Commission 1 (July 22, 1993). The policy provides for open
competition among all telecommunication carriers, and the licensing of all
proposals for new telecommunications services that meet the guidelines for
approval set forth in the letter. Id. The Treasury has licensed several U.S.
carriers to remit to Cuba the full share of Cuba's earnings from
telecommunication services provided by the company, and thereby provide
telephone communications to Cuba. Cuba, U.S. Firms Working to Restore Direct
Phone Communications, REUTERS, November 20, 1994. Cuba's share of past
earnings from telecommunication services between the United States and Cuba,
which are held in blocked U.S. accounts, are not being released.
54.
31 C.F.R. §§ 515.204, 515.560, 515.570 (1963).
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assets. No payments, transfers, withdrawals, or other dealings may
take place with regard to blocked property unless authorized by the
Treasury.55
The CACR place strict limits on the remittance of money to
Cuba. Remittances by U.S. persons to close relatives 56 in Cuba, or
to facilitate non-permanent travel by Cuban nationals to the United
States, are prohibited without a specific license.57 Such licenses are
issued on a case-by-case basis, and only in circumstances of
"extreme humanitarian need," such as terminal illness or other
severe medical emergency. 8 An exception exists for remittances of
up to $500 on a one-time basis from U.S. residents to Cuban
nationals to facilitate their emigration to the United States.59 The
exception only applies, however, after the Cuban national has
received a visa or other permission from the State Department or
United States immigration authorities to enter the United States.'
Gift parcels for individuals or religious, charitable, or educational
organizations in Cuba may be sent or carried by an authorized
traveler, for the use of the recipient, or the recipients' immediate
family. These parcels may be sent provided that the total value of
the items in the parcel does not exceed two hundred dollars, only
one parcel is sent per month by the same person to the same
55.
31 C.F.R. § 515.205 (1963).
56.
The term "close relative" is defined as "spouse, child, grandchild, parent,
grandparent, great grandparent, uncle, aunt, brother, sister, nephew, niece, first
cousin, or spouse, widow, or widower of any of the foregoing. The term close
relative also means mother-in-law, father-in-law, daughter-in-law, son-in-law,
sister-in-law, or brother-in-law." 31 C.F.R. § 515.560(b)(1).
57.
31 C.F.R. §§ 515.563(a), 515.564(c).
58.
Id.
59.
31 C.F.R. § 515.564(c).
60.
Id.
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U.S. TRADE EMBARGO AGAINST CUBA
recipient in Cuba, and only items normally sent as gifts (such as
food, medicine, clothing, and toiletries) are included.
The CACR also prohibit spending money in connection with
most types of travel to Cuba, including:
recreational travel; tourist travel; travel in pursuit of
a hobby; general study hours; general orientation
visits; student class field trips; youth camps;
research for personal satisfaction only; [and] travel
by fish or bird-watching groups or similar affinity
groups .... 61
Transactions related to travel for "professional research and
similar activities" are only permitted by specific license, and are
only applicable to full-time professionals or graduate students who
travel to Cuba to do work in their professional area. 62 Specific
licenses are also required for spending money related to travel to
Cuba for humanitarian reasons (if a compelling need is
demonstrated), free-lance journalism, clearly defined educational
activities, religious activities, activities of recognized human rights
organizations, purposes related to telecommunications activities, or
purposes related to the export, import or transmission of
information or information materials. 63 Expenditure of money
related to travel to Cuba is authorized without a specific license for
travel by United States and foreign government officials, members
of the news media, and, once a year, by people travelling to visit
61.
31 C.F.R. § 515.416(b).
62.
31 C.F.R. § 515.416(a)(1)-(2), as amended 60 Fed. Reg. 54194, 54195
(1995).
63. 31 C.F.R. § 515.560(b), as amended 60 Fed. Reg. 54194, 54196 (1995);
OFAC, WHAT You NEED TO KNOW ABOUT THE U.S. EMBARGo, Aug. 26, 1994.
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close relatives in Cuba in circumstances of extreme humanitarian
need.64
6.
The LIBERTAD Act
On February 9, 1995 Sen. Jesse Helms (R-NC), Chairman
of the Senate Foreign Relations Committee, introduced a bill known
as the "Cuban Liberty and Democratic Solidarity (LIBERTAD) Act
of 1995" [hereinafter LIBERTAD Act], S. 381, intended to further
tighten the embargo by discouraging investment by nationals of
third countries in Cuba, encouraging Cuba's transition to
democracy through internationally supervised, free and fair
elections, defining a plan for the United States to assist transition
and democratic governments in Cuba, and protect U.S. nationals'
property rights abroad. 65 A week later, similar legislation with the
same name was introduced in the House as H.R. 927 by Rep. Dan
Burton (R-IN), Chairman of the Western Hemisphere Subcommittee
of the House Foreign Affairs Committee.' Both versions of the
LIBERTAD Act have been modified several times since their
introduction. The discussion in this paper is based on the versions
that were available as of January 1996: the version of H.R. 927
that was passed by the House on September 21, 199567 [hereinafter
H.R. 927]; and the version of S. 381 that passed the Senate as an
amendment to H.R. 927 in the nature of a substitute 68 [hereinafter
S. Amdt. No. 2936].
Title I of the LIBERTAD Act contains a variety of measures
to strenghten the embargo, ranging from upgraded television
64.
31 C.F.R. § 515.560(a), as amended 60 Fed. Reg. 54194, 54196 (1995).
65.
S. 381, 104th Cong., 1st Sess. (1995).
66.
H.R. 927, 104th Cong., 1st Sess. (1995).
67.
141 Cong. Rec., H8994 et seq., September 14, 1995.
68.
141 Cong. Rec., S15249 et seq., October 17, 1995.
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U.S. TRADE EMBARGO AGAINST CUBA
broadcasting to Cuba, to reductions in aid to countries of the former
Soviet Union if they pay money to Cuba for the use of intelligence
gathering facilities in the island. Among other initiatives, one
provision in Title I would institute civil penalties of up to $50,000
for violations of the TWEA, plus forfeiture of any property
69
involved in the violation.
Another provision in Title I would seek to end "indirect
financing of Cuba" by prohibiting any U.S. person or U.S.
company from extending any loan, credit, or other financing for
any transaction involving property confiscated by the Cuban
Government from a U.S. national who holds a claim for such
confiscation. 70 The LIBERTAD Act would also require the
President to submit annual reports to Congress detailing the
assistance received by Cuba from the governments of other
countries, and a description of the joint ventures completed or in
contemplation between Cuba and foreign investors .71 The reports
would also need to include "a determination as to whether or not
any of the facilities described in paragraph 3 are the subject of a
claim against Cuba by a United States national. "72 If the activities
of a particular foreign investor with regard to Cuba are publicized,
it is likley that the company or individual will be included in the
reports from the Executive to Congress, which would make the
investor vulnerable to retaliatory actions by the United States
government or private parties.
Title II of the LIBERTAD Act delineates a program under
which the United States will lift the trade embargo and provide
economic assistance to Cuba at such a time as the President
determines that a transition government or a democratically-elected
69.
H.R. 927, § 102(d); S. Amdt. No. 2936, § 103(d).
70.
H.R. 927, § 103(a); S. Amdt. No. 2936, § 104(A).
71.
H.R. 927, § 108(b)(3); S. Amdt. No. 2936, § 109(b)(3).
72.
H.R. 927, § 108(b)(4); S. Amdt. No. 2936, § 109 (b)(4).
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government is in power in Cuba.73 As will be further discussed
below, the conditions imposed for those actions under the
LIBERTAD Act have become more numerous, and the definitions
of qualifying "transition" and "democratic" governments in Cuba
more restrictive, than under the Cuban Democracy Act.
Title III of the House version of the LIBERTAD Act
contains other provisions intended to internationalize the embargo
by discouraging investors from third countries from engaging in
business within Cuba.7 4 One provision grants a right to U.S.
nationals, whose property was confiscated by the Cuban
government, to bring an action for money damages in United States
federal district court against foreign nationals or foreign
governments that "traffic" in the confiscated property. Recovery of
damages in such civil suits would result from a determination that
the foreign investor is "trafficking" in "confiscated property" which
is subject to a "claim" that is "owned" by a "United States
person. 75
73.
H.R. 927, § 202(a)(1); S. Amdt. 2936, § 202(a)(1).
74. S. 381 contained a Title Ill which was analogous to its counterpart in H.R.
927. However, Title III was dropped from S. Arndt. 2936 after efforts to defeat
a filibuster by opponents of Title IIfailed. See Christopher Marquis, A Clinton
Victory on Cuba Bill - RepublicansSoften Sanctions,for Now, MIAMI HERALD,
Oct. 19, 1995, at 1A. Senate proponents of Title III, including Senate Majority
Leader Robert Dole (R-KS), have vowed to attempt to reincorporate Title III in
the conference committee that must reconcile the versions of the bill passed by
both houses. Id.
75.
H.R. 927, §§ 302-304. H.R. 927 defines "confiscated" as follows:
The term "confiscated" refers to the nationalization,
expropriation, or other seizure by the Cuban government of
ownership or control of property, on or after January 1,
1959--(i) without the property having been returned or
adequate and effective compensation provided; or (ii) without
the claim to the property having been settled pursuant to an
international claims settlement agreement or other mutually
accepted settlement procedure; and (iii) the repudiation by the
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U.S. TRADE EMBARGO AGAINST CUBA
Title IH declares that foreign nationals or foreign
governments that traffic in confiscated United States property "shall
be liable to the United States national who owns the claim to the
confiscated property for money damages," in an amount which
would be the greater of: (1) the amount, if any, of the claim
certified to the claimant by the Foreign Claims Settlement
Commission of the United States [hereinafter FCSC], plus
Cuban government of, the default by the Cuban government
on, or the failure by the Cuban government to pay, on or after
January 1, 1959 - (i) a debt of any enterprise which has been
nationalized, expropriated, or otherwise taken by the Cuban
government; (ii) a debt which is a charge on property
nationalized, expropriated or otherwise taken by the Cuban
government; or (iii) a debt which was incurred by the Cuban
government in satisfaction or settlement of a confiscated
property claim. H.R. 927, § 4(3)(A).
"Trafficking" in confiscated property is said to occur when a person or
entity "knowingly and intentionally" does one of the following:
(i) sells, transfers, distributes, dispenses, brokers, manages, or
otherwise disposes of confiscated property, or purchases,
leases, receives, possesses, obtains control of, manages, uses
or otherwise acquires or holds an interest in confiscated
property,
(ii) engages in a commercial activity using or otherwise
benefiting from a confiscated property, or
(iii) causes, directs, influences, approves, participates
in or profits from trafficking as described in clauses (i) and (ii)
by another person, or otherwise engages in trafficking (as
described in clauses (i) and (ii) through another without the
authorization of the United States national who holds a claim
to the property. Id., § 4(10).
The term "property" is said to include, "any property (including patents,
copyrights, trademarks and any other forms of intellectual property), whether
real, personal or mixed, and any present, future or contingent right, security, or
other interest therein, including any leasehold interest." Id., § 4(9).
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[Vol 3
interest;76 (2) the amount determined by a special master appointed
by the court (including the FCSC); or (3) the fair market value of
the property (defined as the property's current value, or the value
of the property when confiscated plus interest at statutory rates,
whichever is greater).77 A U.S. national suing under this provision
can recover three times the amount of damages specified under the
above options if the person or government trafficking in the
confiscated property has received notice of the U.S. national's claim
to ownership of the property, and has been provided with a copy of
the provisions in the LIBERTAD Act affording this remedy.78 The
Act, however, allows a six-month grace period from the enactment
of the legislation to parties engaged in "trafficking" in expropriated
properties in Cuba to terminate their activities without incurring any
79
liability.
In addition to making third country investors in Cuba
potentially subject to civil liability to U.S. property owners, Title
IV of H.R. 927 imposes a broadly-worded immigration exclusion
against foreigners involved in transactions concerning properties
76. In 1964, Congress amended the Foreign Claims Settlement Act to establish
a Cuban Claims Program, under which the FCSC was given the authority to
determine and certify the validity and amount of claims by U.S. nationals against
the Cuban government for the uncompensated taking of their property in the
early 1960s. 22 U.S.C. § 1643 (amended in 1994). The Cuban Claims Program
was active between 1966 and 1972; during that time, the FCSC certified 5,911
expropriation claims by U.S. citizens and companies, with an aggregate amount
of $1.8 billion in 1960 dollars, not counting interest. FOREIGN CLAIMS
at 412
See generally, Matias F. Travieso-Diaz, Some Legal and Practical
SETrLEMENT COMM'N, FINAL REPORT OF THE CUBAN CLAIMS PROGRAM,
(1972).
Issues in the Resolution of Cuban Nationals'ExpropriationClaimsAgainst Cuba,
16 U. PA. J. INT'L Bus. L. 217 (1995).
77.
Id. § 302(a)(1). Recovery under either option includes also "reasonable
costs and attorneys fees." Id.
78.
Id. § 302(a)(3).
79.
Id. § 302(a)(1).
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U.S. TRADE EMBARGO AGAINST CUBA
confiscated by Cuba from U.S. nationals. 8" Section 401(a) of H.R.
927 states that the U.S. Departments of State and Justice shall
exclude from the United States any alien who:
(1) has confiscated, or has directed or overseen the
confiscation of, property the claim to which is
owned by a United States person, or converts or has
converted for personal gain confiscated property, the
claim to which is owned by a United States national;
(2) traffics in confiscated property, the claim to
which is owned by a United States national; (3) is a
corporate officer, principal or shareholder with a
controlling interest of an entity which has been
involved in the confiscation of property or
trafficking in confiscated property, the claim to
which is owned by a United States person; or (4) is
a spouse, minor child or agent of a person
excludable under paragraph (1), (2) or (3)."
This provision is broader in reach than those in Title HI,
which only proscribe "trafficking," and could turn into violators
many individuals having only incidental contacts with the property.
The immigration exclusion would go into effect upon enactment of
the LIBERTAD Act, and would be subject to a "national interest
exception" pursuant to which the Secretary of State could exempt
application of the ban on a case-by-case basis where the national
interest of the United States so warranted.'
80. S. 381 also used to contain an analogous set of immigration provisions to
those found in Title IV of H.R. 927. However, the immigration provisions in
S. 381 were deleted.
81.
H.R. 927, § 401(a).
82.
Id. § 401(c).
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The outlook of the LIBERTAD Act was uncertain as of this
writing, as it is clear that the Clinton Administration and Congress
differ on what the proper U.S. policy toward Cuba should be; those
differences are evidenced in their respective positions on the
LIBERTAD Act. While efforts are being made in Congress to
strengthen the embargo on Cuba via passage of the LIBERTAD Act
(including Title ), the State Department has recommended that
the President veto the bill if sent to him in the version adopted by
the House.A3 Equally symbolic of the Executive and Legislative
Branch's divergent views on Cuban policy has been the
Administration's easing of sanctions imposed on Cuba in August
1994 in response to the refugee crisis.A4 It is unclear whether the
Republicans have enough votes in the Senate to defeat a "filibuster"
by the Democrats against any version of the LIBERTAD Act that
resembles H.R. 927, let alone override a veto by the President. It
is possible, however, that the President will sign a modified version
of the bill that, in his view, is a substantial improvement over H.R.
927, or that Congress will pass the conference committee version
of the legislation by such a large majority that it will force the
President to sign the bill or have its veto overridden.
B.
Conditionsand Meansfor Removing the Express Embargo
Prohibitions
1.
Introduction
As discussed in Section A, the U.S. trade embargo against
Cuba is based on three major statutes (plus the LIBERTAD Act, if
83. September 20, 1995 Statement of Administration Policy; letter dated
September 20, 1995 from U.S. Secretary of State Warren Christopher to House
Speaker Newt Gingrich. See also Steven Greenhouse, Bill to Ease Cuba Suits
Faces a Veto by Clinton, N.Y. TIMES, Aug. 20, 1995, at A4.
84. On October 6, 1995 in a foreign policy speech, the President announced
moves to loosen some of the embargo restrictions on travel and other contacts
with Cuba. See note 50, supra.
U.S. TRADE EMBARGO AGAINST CUBA
19951
enacted). The multiple statutory authority for the sanctions may
require a diversity of procedures for lifting them. Thus, because
the TWEA grants the President direct authority to impose sanctions
upon foreign countries, it follows that an embargo issued under the
TWEA could be lifted through unilateral Presidential action, such
as an executive order or a treaty with Cuba. The sanctions imposed
by the FAA, the CDA, and the proposed LIBERTAD Act, on the
other hand, are explicitly defined in the statutes, and could require
action by both the President and Congress. For example, in order
to lift the sanctions listed in Section 1706 of the CDA, the President
would have to follow the guidelines in Section 1708 of the statute,
including making a report to Congress of his findings.
This section reviews the various statutes to understand how
the President and Congress might interact to remove the embargo's
prohibitions. Before proceeding with the analysis, however, it is
helpful to examine how the United States government has handled
the lifting of similar embargoes against other countries in the past.
2.
Analogies to Other Countries
The United States has imposed, and later lifted, sanctions on
several foreign countries whose policies were antagonistic to the
interests of the United States. Because the Cuban sanctions arise
out of three sources of statutory authority, this section describes the
process followed to lift embargoes imposed under laws that
resembled each type of legislation.
China provides an example of an embargo that arose solely
out of TWEA authority. Sanctions on Rhodesia were imposed by
Presidents Johnson and Carter, pursuant to express statutory
authority granted to the President, much like President Kennedy did
with regard to Cuba under the FAA. Finally, sanctions against
South Africa were imposed directly by Congress, as was done in
the CDA and in the proposed LIBERTAD Act.
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a.
[Vol 3
China
As mentioned earlier, the sanctions imposed by President
Truman against Communist China in 1950 were based on TWEA
authority. The Office of Foreign Assets Control of the Department
of the Treasury administered the embargo on trade with China
through the regulations in 31 C.F.R. Part 500. OFAC ultimately
lifted the trade sanctions against China in accordance with a treaty
signed between the United States and China. An announcement in
the Federal Register 85 explained:
The Office of Foreign Assets Control is amending §
500.201(d) of the Foreign Assets Control
Regulations by the deletion of "China" from the
Schedule of "designated countries," except for the
limited purposes of the new Part II of the Schedule.
In keeping with the amendment, the Office is
amending §§ 500.204, 500.328, 500.557, 500.558,
and 500.559 to delete references to China or
nationals thereof. The purpose of the amendment is
to implement the Agreement Concerning the
Settlement of Claims entered into between the
United States and the People's Republic of China on
May 11, 1979, as amended by an exchange of notes
on September 28, 1979, to provide for the
unblocking on January 31, 1980 of assets blocked
because of an interest therein of the People's
Republic of China or its nationals.
If United States actions with respect to Cuba were to follow
the Chinese pattern, OFAC would most likely abolish the CACR in
response to some form of Presidential mandate. The President
might enter into a treaty with Cuba (as was the case in China), or
might issue an executive order directing OFAC to take the steps
85.
45 Fed. Reg. 7224 (1980).
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necessary to remove the embargo prohibitions. In any case,
China's example makes it clear that Congressional action or
approval is not required in order for the Executive to lift the trade
embargo against Cuba to the extent it rests on the authority of the
TWEA.
b.
Rhodesia
The Rhodesian sanctions present an example of a. nonTWEA embargo based upon a specific Congressional grint of
authority to the President. Section 5 of The United Nations
Participation Act of 194586 gives the President the authority to
impose economic sanctions against a foreign country if necessary to
give effect to resolutions of the U.N. Security Council. This
general grant of authority to the President is similar to that in the
TWEA, in that both statutes allow the President to impose sanctions
without further enabling legislation.
Citing the U.N. Participation Act of 1945 as authority,
President Johnson imposed a limited embargo against Rhodesia in
1967 to implement measures adopted by the U.N. Security
Council.' In 1968, the President expanded the sanctions to prohibit
all trade with Rhodesia, again pursuant to Security Council
resolutions .
In 1971, however, Congress amended the Strategic and
Critical Materials Stock Piling Act to allow the importation of
commodities determined to be strategic and critical to the United
States. This amendment created exceptions to the Rhodesian
embargo for strategic materials, including chrome.
86.
22 U.S.C. § 287c (1945).
87. Exec. Order No. 11,322, 32 Fed. Reg. 33 (1967), reprinted in 1967
U.S.C.A.A.N. 3453-54.
88. Exec. Order No. 11,419, 33 Fed. Reg. 10837 (1968), reprintedin 1968
U.S.C.A.A.N. 4711-13.
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Several years later, realizing the adverse impact on U.S.
foreign policy of continuing to import strategic materials from
Rhodesia, Congress acted to reimpose a comprehensive trade
embargo against that country. In order to abolish the exceptions
and ban the importation of chrome and other strategic materials,
Congress had to pass legislation to allow the reimposition of a total
embargo. Congress therefore enacted Pub. L. 95-12, 91 Stat. 22
(1977), which added the following sentence to 22 U.S.C. § 287c
giving the President the power to fully implement the Security
Council's mandate:
Any Executive order which is issued under this
subsection and which applies measures against
Southern Rhodesia pursuant to any United Nations
Security Council Resolution may be enforced,
notwithstanding the provisions of any other law.
A comprehensive embargo with no exceptions was then put
in place immediately. President Carter ultimately lifted the
Rhodesian embargo by another executive order, in which he
revoked all previous executive orders imposing the embargo and
directed the relevant executive agencies to take the steps necessary
89
to rescind the trade sanctions.
The Rhodesian example indicates that Congressional action
is not needed to end an embargo where the President has been given
express authority to impose the embargo in the first place, and
Congress has neither set conditions for the lifting of the embargo,
nor reserved any review power over the President's decision. In
this situation, the President only needs to issue an executive order
revoking the previous orders implementing the embargo. Thus, if
the Cuban trade embargo were to be acted upon in accordance with
the Rhodesian example, the President would need to issue an
executive order revoking all previous executive orders and
89.
Exec. Order No. 12,183, 44 Fed. Reg. 74787 (1979), reprintedin 1979
U.S.C.C.A.N. 3375-6.
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regulations that instituted the embargo against Cuba. This would
be the situation with respect to the trade embargo authorized by the
FAA.
c.
South Africa
The South African embargo was based upon an Act passed
by Congress in 1986.90 The Comprehensive Anti-Apartheid Act of
1986 [hereinafter CAAA] set forth definite United States policy
goals towards South Africa (i.e., "to bring about reforms in [the
South African] system of government that will lead to the
establishment of a nonracial democracy"), 9' and imposed, among
other sanctions, explicit prohibitions on the importation from, and
export to, South Africa of certain items.' Congress left open the
possibility of imposing additional sanctions upon recommendation
by the President. 93 The sanctions would end if the government of
South Africa took five measures specified in 22 U.S.C. § 5061(a).
Alternatively, the President could suspend or modify the sanctions
under the conditions specified in 22 U.S.C. § 5061(b):
The President may suspend or modify any of the
measures required by this subchapter or section
5091(c) of this title or section 5094(b) of this title
thirty days after he determines, and so reports to the
Speaker of the House of Representatives and the
chairman of the Committee on Foreign Relations of
the Senate, that the government of South Africa has:
90. Comprehensive Anti-Apartheid Act of 1986, Pub. L. 99-440, 100 Stat.
1087, as amended by Pub. L. 99-631, 100 Stat. 3515, 22 U.S.C. § 5001 etseq
(1986), repealedby Pub. L. 103-149, 107 Stat. 1503 (Nov. 23, 1993).
91.
22 U.S.C. § 5011(a) (1986).
92.
22 U.S.C. §§ 5051-5073 (1986).
93.
22 U.S.C. §§ 5091(c), 5094 (1986).
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(1) taken the action described in paragraph (1) of
subsection (a) of this section,
(2) taken three of the four actions listed in
paragraphs (2) through (5) of subsection (a) of this
section, and
(3) made substantial progress toward dismantling the
system of apartheid and establishing a nonracial
democracy, unless the Congress enacts within such
30-day period, in accordance with Section 5112 of
this title, a joint resolution disapproving the
determination of the President under this subsection.
The above provisions set two different procedures under
which the sanctions against South Africa could be lifted:
automatically, if South Africa took all the measures specified in §
5061(a); or through a determination by the President under §
5061(b) that certain of the enumerated conditions were met, this
determination being subject to nullification if Congress disagreed
with it.
President Bush lifted the South African embargo through an
Executive Order in 1990' The Executive Order cited as a basis
for lifting the sanctions the President's conclusion that the
government of South Africa had taken all of the steps specified in
section 311(a) of the Act. The Executive Order declared "title HI
and sections 501(c) and 504(b) [22 U.S.C. §§ 5051-5073, 5091(c)
and 5094(b)] of the Act have terminated" and directed all affected
executive departments and agencies to take the steps necessary to
terminate the sanctions.95 Thus, the President followed the course
94. Exec. Order 12,769, 56 Fed. Reg. 31855, reprinted in 1991
U.S.C.C.A.N. B50.
95. The Executive Order also declared that it revoked the previous executive
orders declaring a state of national emergency with respect to South Africa,
although these orders had already lapsed because the President failed to renew
them as required by the IEEPA.
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of § 5061(a), and proclaimed that the embargo had ended without
referring his decision to Congress. 96
The CDA is analogous to the CAAA, in that it requires a
degree of interaction between the President and Congress. Section
1708 of the CDA directs that the President is to officially report to
Congress that the five conditions for waiver of the sanctions against
Cuba have been met. This report is analogous to that required by
§ 5061(b) of the CAAA. The reporting requirement did not need
to be satisfied in the case of South Africa, however, because the
President exercised the option of declaring that the South African
government had satisfied each of the five conditions listed in §
5061(a). Since the CDA does not give the President this option,
Congress would need to receive notice from the President that the
CDA's requirements have been satisfied.
Another difference between the CAAA and the CDA is that
the CAAA expressly provided an opportunity for Congress to
countermand the President if Congress disagreed with the
President's determination. No such provision is included in the
CDA.
96.
In an article shortly before the sanctions were officially lifted, Presidential
Spokeswoman Margaret Tutwiler was quoted as saying, "[no] report or
notification of Congress is required by the law. Sanctions would be terminated
immediately upon issuance of the executive order." Alan Eisner, U.S. to Lift
South Africa Economic Sanctions, THE REUTERS BUS. RP., July 9, 1991.
Nonetheless, the White House did prepare a fact sheet outlining the steps taken
by the South African Government to meet the five conditions spelled out in
Section 5061(a). White House Fact Sheet, Justification for Conclusion That the
South African Government has Met the Conditions-for Sanctions Lifting, FED.
NEWS SERI CE, July 10, 1991.
Prior to the President's determination, the Department of State had been
making annual reports to Congress regarding steps taken by the South African
Government to meet the five conditions required by the CAAA. When the
Department of State concluded that the five requirements for termination set in
22 U.S.C. § 5061(a) had been met, it so informed the President, and he
proceeded to lift the sanctions.
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d.
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Summary
The actions taken by the United States to remove trade
embargoes against foreign countries appear to show that, unless
expressly limited by Congress, Presidential decisions and
determinations are self-executing. South Africa represents a good
example of a self-executing determination, in that Congress
authorized the President to act unilaterally. The CDA, on the other
hand, requires a higher level of interaction between the President
and Congress.
3.
The Trading with the Enemy Act
Removing the TWEA as a source of the Cuban trade
embargo would be simple. The most straightforward procedure
would be for the President to abstain from issuing the annual
Determination required by the IEEPA that exercise of the TWEA
with respect to Cuba is in the national interest of the United States.
A more likely course of action, however, would be for the
President to issue an executive order expressly ending the state of
emergency with regard to Cuba. The same document could repeal
other elements of the embargo, such as the CACR. This was the
course followed for Rhodesia.
The President has the power to take these actions at any
time, irrespective of any developments (or the absence thereof) in
Cuba.
4.
The Foreign Assistance Act
Section 620(a)(1) of the FAA 7 authorizes the President to
"establish and maintain a total embargo upon all trade between the
United States and Cuba." This section is clearly permissive, and
leaves the President free to determine whether to "maintain" the
embargo, and consequently, whether to lift it. The President could
97.
22 U.S.C. § 2370(a)(1) (1994).
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remove the embargo, to the extent it is imposed under this
provision, by an executive order that rescinds President Kennedy's
Proclamation and revokes all subsequent executive orders
implementing aspects of the embargo. Again, the President could
take this action unilaterally and without reference to any external
events.
The FAA, however, goes beyond authorizing the imposition
of a trade embargo. Section 620(a)(1) states unambiguously that
"[n]o assistance shall be furnished under this chapter to the present
government of Cuba." Therefore, unless provided for in other
laws, the United States government cannot grant economic
assistance to Cuba as long as the Castro regime remains in power.
Moreover, section 620(a)(2) of the FAA decrees that no
assistance, sugar quota, or "other benefits under any law of the
United States" shall be furnished to Cuba unless the President (a)
determines that providing such assistance or benefits is necessary in
the interest of the United States, or (b) the President determines that
the Cuban government has taken appropriate steps under
international law standards to provide compensation or restitution
to U.S. citizens whose property was expropriated by the Castro
government.
These two sections of the FAA, read together, mean that, in
order for the United States government to be able to provide
economic assistance to Cuba, (1) the Cuban government would have
to change and (2) a subsequent government would need to have
taken "appropriate steps" to resolve the compensation and
restitution claims of U.S. citizens.9" The FAA leaves it to the
98.
The total ban on assistance to Cuba contained in section 620(a)(2) of the
FAA has been modified in part by several provisions in the CDA. As discussed
above, section 1705 of the CDA, 22 U.S.C. § 6004, specifically states, "[tihe
provisions of this section apply notwithstanding any other provision of law,
including section 620(a) of the Foreign Assistance Act of 1961 ....
"
This
assertion overrides subsection (a), as well as subsections (e), (f) and (h) of
section 620 of the FAA. Also, Section 1707 of the CDA, 22 U.S.C. § 6006,
effectively overrides all the provisions of section 620 of the FAA with regard to
providing food, medicine, and medical supplies for humanitarian purposes to
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[Vol 3
President to determine whether the Cuban government has indeed
The President could,
taken such "appropriate steps." 99
alternatively, declare that providing assistance or other beneficial
aid or trade concessions to Cuba is "necessary in the interest of the
United States." In either case, the President would have to issue a
formal determination to that effect, e.g., a Proclamation or
Executive Order.
5.
The Cuban Democracy Act
a.
Total Lifting of the Embargo
The CDA sets very specific conditions for the lifting of the
U.S. trade embargo against Cuba. Section 1708(b)(3) of the
CDA 100 directs the President to "take steps to end the United States
trade embargo of Cuba" when two conditions have been met. First,
the President must determine and report to Congress that the Cuban
government has carried out the five actions identified in § 1708(a),
including: holding free and fair elections conducted under
international supervision, permitting opposition parties ample time
to organize and campaign for such elections, showing respect for
the basic civil liberties and human rights of the citizens of Cuba,
moving toward establishing a free market economic system, and
committing itself to constitutional change that would ensure regular
free and fair elections. The second condition is that a new Cuban
government be elected as a result of such free and fair elections.
Cuba once there is a Cuban government that meets the requirements of section
1707 of the CDA. Section 1707 does not mention the payment of compensation
for nationalized or expropriated property as a prerequisite for providing aid to
Cuba.
99. Because the definition of "appropriate steps" is tied to "international law
standards," the determination whether the steps are appropriate is an objective
one, and would be amenable to review by the courts.
100. 22 U.S.C. § 6007(b)(3) (1992).
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Section 1708(b)(3) could be interpreted as establishing the
circumstances under which the President must lift the trade
embargo, while still permitting him to do so under other, perhaps
less restrictive, conditions. However, such a reading would be
contrary to the policies expressed in the CDA, which include
seeking "a peaceful transition to democracy and a resumption of
economic growth in Cuba through the careful application of
sanctions. . to maintain sanctions on the Castro regime so long as
it continues to refuse to move toward democratization and greater
free and fair elections
respect for human rights," and "to encourage
101
future."
political
Cuba's
to determine
If Section 1708(b)(3) does, as it appears, set unwaivable
requirements for lifting the embargo, the President is left with no
flexibility to react to events in Cuba. If the enumerated conditions
are to be met, the lifting of the embargo may take place months, if
not years, after a political change starts in Cuba.
b.
Partial Lifting of the Embargo
Section 1707 of the CDA allows partial lifting of the trade
embargo to allow shipment of food, medicines and medical supplies
to Cuba if the President determines and notifies Congress that: the
government in power in Cuba has made public commitments to
holding free and fair elections within six months and to respecting
human rights and basic democratic freedoms, is implementing those
commitments, and is not providing weapons or funds to any group
in another country that seeks the violent overthrow of the
government of that country.
c.
Removal of Other CDA Sanctions
The President, for the most part, retains the power to lift
most of the specific sanctions imposed by the CDA in one simple
101. Id. § 6002.
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step. Only a few freestanding provisions would require statutory
change.
Section 1708(a) of the CDA indicates that the President
"may" waive the sanctions in section 1706 if the five enumerated
conditions in section 1708(a) are satisfied. This language appears
permissive, not prescriptive.
Section 1705 imposes certain limitations on the donations of
food, exports of medicines and medical supplies, and provision of
telecommunications services to Cuba. Section 1705(a) declares that
the provisions of the section apply "notwithstanding any other
provision of law," including the TWEA and the FAA. Moreover,
Congress, perhaps inadvertently, never applied section 1708 to the
provisions of section 1705. Therefore, even a President who made
the findings set forth in section 1708 would be unable to change the
stipulations of section 1705 on his own, and would have to rely on
Congressional action to repeal the restrictions.
d.
Economic Assistance
Section 1708(b)(2) of the CDA directs the President, once he has
made the determinations set forth in Section 1708(a), to provide emergency relief during Cuba's transition to a viable economy. 1" 2 This
102. The CDA does not define what type of emergency relief should be given
to Cuba once the conditions set forth in Section 1708(a) are satisfied. This gap
is covered in both the LIBERTAD Act, H.R. 927, 104th Cong., 1st Sess. (1995),
and in a proposed bill introduced in the 104th Congress by Rep. Robert
Menendez (D-NJ). The Free and Independent Cuba Assistance Act, H.R. 611,
104th Cong., 1st Sess. (1995), upon which Title II of the LIBERTAD Act is
based, would require the President to develop a plan for providing economic
assistance to a Cuban transition government, and later to a democratic
government. The President must report to Congress within 180 days of
enactment of the legislation on the details of the plan. The bill would provide aid
to a transition government in Cuba analogous to that specified in Section 1707
of the CDA, with the addition of assistance to meet emergency energy needs, and
help in preparing the Cuban military forces to adjust to a new role in civilian life.
The bill defines a democratic government as one that: results from free
and fair elections conducted under internationally recognized observers; has
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97
section also makes no reference to the requirement in Section
620(a)(2) on payment of compensation to U.S. citizens for the
Cuban government's expropriations of the early 1960s as a precondition to giving economic assistance to Cuba.
permitted opposition parties ample time to organize for such elections and
permitted all candidates full access to the media; shows respect for civil liberties
and human rights; has made demonstrable progress in establishing an independent
judiciary; is moving towards establishing a market-oriented economic system;
and has made or is committed to making constitutional changes that would ensure
regular free and fair elections. Such a government would be eligible for a wide
range of economic assistance programs from the U.S. government, to include:
aid under the Foreign Assistance Act of 1961 and the Agricultural Trade
Development and Assistance Act of 1954; finances, guarantees, and other forms
of assistance provided by the Export-Import Bank of the United States; financial
support for investment projects by the Overseas Private Investment Corporation;
assistance by the Trade and Development Agency; availability of Peace Corps
programs; relief of Cuba's external debt; and "other appropriate assistance" to
carry out the purposes of the legislation.
The plan to be developed by the President must include a strategy for
distributing economic assistance, and is to authorize assistance to be provided
through U.S., international and Cuban nongovernmental organizations. The
President is called upon to take the necessary steps to obtain the agreement of
other countries and of international financial institutions to provide assistance to
Cuba, and work with such countries and organizations to coordinate the various
assistance programs. The President will determine whether to designate Cuba as
a beneficiary country under the Caribbean Basin Initiative and, upon enactment
of free trade agreements between the U.S. and other countries in the Western
Hemisphere, enter into a framework agreement for trade and economic assistance
with a transition government in Cuba, potentially leading to the conclusion of a
free trade agreement between the two countries.
The bill also directs that, upon submitting a determination to Congress that
a democratic government is in power in Cuba, the President "shall terminate the
embargo on trade with Cuba." Because of the requirements set in the definition
of a democratic government, lifting of the embargo would take place quite some
time after the start of the transition. This is the same problem posed by the CDA
and, even more so, by the House version of the LIBERTAD Act.
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Effect of the LIBERTAD Act
The proposed LIBERTAD Act states that "[u]pon submitting
a determination to the appropriate Congressional committees under
Section 203(c)(1) that a transition government of Cuba is in power,
the President, after consultation with the Congress, is authorized to
take steps to suspend the economic embargo of Cuba to the extent
that such action contributes to a stable foundation for a
democratically elected government in Cuba. "103 Subsequently,
"[u]pon submitting a determination to the appropriate Congressional
committees under Section 203(c)(3) that a democratically elected
government of Cuba is in power, the President shall take steps to
terminate the economic embargo of Cuba."' 104 The President's
suspension of the embargo is subject to being countermanded by
Congress through a joint resolution of Congress disapproving of the
President's action.10 5
The provisions of the LIBERTAD Act, if turned into law,
would impose significant additional restrictions on any
modifications or lifting of the embargo. The President would need
to make the determinations called for in the Act, specifically that a
"transition government" and a "democratically elected government"
are in place (these terms are differently defined at the present time
in the House and Senate versions of the bill) before he could
proceed to suspend or lift the embargo.'0 6
103. H.R. 927, 104th Cong., 1st Sess. § 204(a) (1995).
104. Id. § 204(c).
105. Id. § 204(e)(2).
106. H.R. 927 sets over a dozen specific conditions (ranging from ceasing
interference with Radio or Television Marti broadcasts to allowing the
establishment of independent trade unions and returning to the U.S. "all persons
sought by the United States Department of Justice for crimes committed in the
United States") that a government in Cuba must satisfy before it can be defined
as a "transition government" and qualify for emergency aid. Id. § 205(a). By
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U.S. TRADE EMBARGO AGAINST CUBA
f.
Summary
The accumulated embargo legislation has created a situation
such that Cuba's transition government must proceed in a very
specific manner that meets the requirements of Section 1708 of the
CDA and Sections 205 and 206 of the proposed LIBERTAD Act in
order for the President to be able to lift the embargo sanctions.
Assuming the conditions set forth in those laws are met, once the
President submits to Congress the reports required by the
legislation, he can issue an executive order similar to that issued by
President Bush to lift the South African embargo. The President
will also be able at that time to order all affected executive
departments and agencies, including Treasury, State and
contrast, under S. Amdt. No. 2936, a transition government must take only four
actions before aid can be given to it: (1) legalize all political activity, (2) release
all political prisoners and allow for investigations of Cuban prisons by
appropriate international human rights organizations, (3) abolish the Department
of State Security, Committees for the Defense of the Revolution and Rapid
Response Brigades, and (4) exclude Fidel or Raul Castro from any role in
government. Id. (Some of the House requirements are identified in the Senate
bill as circumstances that the President "shall take into account" in determining
whether a transition government is in power in Cuba.) On the other hand, both
the House and Senate versions would provide some flexibility to the President to
temporarily suspend portions of the embargo against a transitional Cuban
government if he determines that such action would contribute "to a stable
foundation for a democratically elected government in Cuba."
Requirements for assistance to a democratically elected Cuban
government under the Senate version of the LIBERTAD Act are made
non-binding by only directing that the President "take into account" a list of
circumstances when making his determination whether the Cuban government
qualifies for such aid. Id. § 206. By contrast, the House version defines seven
requirements that must be met before aid can be granted to a
democratically-elected Cuban government, including that Cuba have made
"demonstrable progress in returning to United States citizens (and entities which
are 50 percent or more beneficially owned by United States citizens) property
taken by the Cuban Government from such citizens and entities on or after
January 1, 1959, or provided fill compensation for such property in accordance
with international law standards and practice." Id.
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Commerce, to implement the termination of the sanctions listed in
Section 1706 and the sanctions against other countries implemented
under Section 1704 of the CDA, and any additional sanctions
imposed pursuant to the LIBERTAD Act.
If, however, the events in Cuba did not fit the pattern set out
in Section 1708 of the CDA and in the proposed LIBERTAD Act,
the embargo would remain in place until the conditions in Cuba
conformed to the statutory requirements, or until new legislation
was enacted. Individuals in the United States who have an interest
in helping Cuba make a successful transition to democracy would
then have the opportunity -- indeed, the need -- to exert political
muscle to remove the obstacles set by an unduly prescriptive
legislation then in place. The United States government's ability to
assist Cuba as warranted by the circumstances would thereby by
restored.
LI. THE INDIRECT EMBARGO
A.
U.S. Economic Assistance Programs from which Cuba is
Excluded as a Result of the Embargo
In the three and a half decades since the triumph of Cuba's
revolution, the United States has instituted a series of programs
designed to assist in the economic development of the less affluent
nations in the hemisphere. Together with nonregion specific aid
programs administered by various agencies of the federal
government, these measures offer varied, and at times duplicative,
support for the economic growth of friendly Latin American and
Caribbean countries.
The assistance programs take a variety of forms. They
include regional and nonregional programs and preferences;
programs with a commercial purpose, as well as humanitarian
assistance grants with significant commercial impact; programs run
by the United States government, as well as those funded by the
government but administered by outside organizations; programs
assisting Latin American and Caribbean countries directly, and
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U.S. TRADE EMBARGO AGAINST CUBA
101
others having a positive effect on the economies of those countries
through the actions of a U.S. program beneficiary.
Cuba has been excluded from all of these programs as a
result of the U.S. trade embargo legislation, particularly the FAA,
which deprives Cuba of access to trade assistance programs
sponsored by the United States or involving significant United
States participation. The purpose of this section is to summarize
the programs or activities that are currently unavailable to Cuba,
but could be used to help in the country's reconstruction upon the
lifting of the embargo. It should be noted, however, that the scope
of the assistance programs sponsored by the United States
government, and the existence of the programs themselves, depend
on policy and budgetary considerations that change with the
vagaries of the political process. Therefore, some of the programs
described in this section may not be in effect, or may exist in
significantly modified form, when Cuba becomes eligible for U.S.
assistance.
The discussion that follows will examine the following types
of assistance:
Direct assistance funds for foreign governments;
trade preferences for imports into the United States;
tax incentives for U.S. businesses to promote trade
and investment in the region; training and technical
assistance for U.S. and Latin American and
Caribbean businesses; information, consulting
services, trade missions and research grants for the
promotion of trade and investment by U.S. and Latin
American and Caribbean private enterprise;
financing of trade and investment through grants,
loans, loan guarantees and trade credits; and
forgiveness of foreign debt to the United States.' 07
107. This paper will not address military, anti-narcotics and economic policy
assistance programs, humanitarian aid programs, or most assistance provided by
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The main vehicles for this assistance are the Enterprise for
the Americas Initiative [hereinafter EAI], the Caribbean Basin
Initiative [hereinafter CBI], and a number of other economic aid
programs whose applicability is generally not limited to the
Americas.'08
1.
The Enterprise for the Americas Initiative
a.
Brief Historical Overview of U.S. Programs
to Foster Growth in Latin America
Since Cuba's Revolution in 1959, a number of economic
assistance programs have been sponsored by the United States to
promote economic growth and improve living standards in Latin
America. The Alliance For Progress, started by President John F.
multi-lateral organizations funded in part by the U.S., such as the United
Nations, the World Bank and the International Monetary Fund. U.S. legislation
prohibits the use of funds contributed by the U.S. to international organizations
for programs involving Cuba. 22 U.S.C. § 2227(a) (1994). See also note 1.
108. U.S. assistance programs provide help in areas beyond direct economic
aid. For example, the U.S. Commerce Department's Latin American/Caribbean
Business Development Center [hereinafter LA/CBDC] issues a bulletin and
various other publications that provide information to U.S. and Latin American
businessmen on the benefits of the CBI, the EAI, non-regional federal
government programs, and multi-lateral lending organizations. The center also
helps those seeking investment and trading partners by providing the following
services: business referral, matchmaking, workshops, symposia, conferences,
business missions to the region and reverse trade missions for Latin American
and Caribbean producers in the United States. The LA/CBDC works closely
with the U.S. Agency for International Development's Bureau for Latin America
and the Caribbean, Office of Trade and Investment.
As another example, the CBI Agribusiness Information Center of the
U.S. Department of Agriculture is a clearinghouse of information on agricultural
trade leads, technical and scientific expertise, marketing, and investment. The
Center also publishes information on federal agricultural programs and
regulations.
19951
U.S. TRADE EMBARGO AGAINST CUBA
103
Kennedy in 1961, was the first of these programs. Established
shortly after the Cuban revolution, Kennedy's initiative was aimed
at encouraging Latin American governments to advance reform in
the areas of civil and human rights in return for U.S. economic
assistance. 0 9 As the 1960s wore on, military governments friendly
to the United States or, at minimum, anti-Communist, began to
dominate Latin America, and U.S. interest and support for Latin
American development waned. In 1979, however, when Marxist
revolutions erupted in Nicaragua and in the Caribbean nation of
Grenada, the United States took a renewed interest in encouraging
Latin American economic development.
In 1983, the CBI was established to allow countries in the
Caribbean and Central America greater access to U.S. markets." 0
Seven years later, President Bush announced a policy to encourage
development in Latin American countries that were in the process
of reforming their economies following a decade of very slow
growth. Called the Enterprise for the Americas Initiative, the
policy was created to "encourage and support improvement in the
lives of the people of Latin America and the Caribbean through
109. It was believed by the Kennedy Administration that through the promotion
of economic growth and reform in the areas of human and civil rights in Latin
America, another "Cuba" could be avoided. During the 10 years between 1961
and 1970, U.S. assistance to Latin America averaged $1.1 billion per year.
COLE BLASIER, THE HOVERING GIANT: U.S. RESPONSE TO REVOLUTIONARY
CHANGE IN LATIN AMERICA 1910-1985, 249-250 (rev. ed. 1985). See also
HAROLD MOLINEU, U.S. POLICY TOwARD LATIN AMERICA: FROM REGIONALISM
TO GLOBALISM, 140-141 (2d. ed. 1990).
110. The CBI, with its emphasis on free trade and the development of private
enterprise, represents a different economic philosophy than the Alliance for
Progress which provided U.S. loans and grants to Latin American governments
for promotion of social programs. MOLINEU, supra note 109, at 123-125, 141.
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These goals
market-oriented reforms and economic growth."''
trade,
pillars"
of
the
EAI:
were to be achieved under the "three
12
reduction.
debt
and
investment,
Despite a change in presidential administrations in 1992, the
principles of the EAI have continued to be U.S. policy, and aspects
of the EAI continue to be implemented, especially in the area of
trade; however, the name has virtually ceased to be used by the
White House, government agencies and the press. The signing of
NAFTA and GATT, and the goals outlined at the December 1994
Summit of the Americas are the most prominent recent attempts by
the United States to lower barriers to trade between countries in the
Americas and thus give effect to one of the main objectives of the
3
EAT."
111. 22 U.S.C. § 2430 (1992).
112. OFFICE OF THE PRESIDENT OF THE UNITED STATES, EXECUTIVE SUMMARY,
ENTERPRISE FOR THE AMERICAS INITIATIvE: A VISION FOR ECONOMIC GROWTH
IN THE WESTERN HEMISPHERE, (February 1992).
113. The North American Free Trade Agreement, enacted on December 8, 1993
[hereinafter NAFTA], established a free trade area between Mexico, the United
States, and Canada by reducing tariff barriers, establishing standards for certain
products, and providing a mechanism for dispute resolution. 19 U.S.C. §§
3301-3473. In its first year, 1994, NAFTA had a dramatic effect on trade among
Canada, the United States, and Mexico as trade grew by over $50 billion, a 17 %
increase. U.S. DEP'T OF COMMERCE, DOC. .No. 4003, NAFTA: FIRST YEAR
SNAPSHOT 1 (Feb. 17, 1995).
Although not region-specific like NAFTA, the General Agreement on
Tariffs and Trade [hereinafter GATTI], signed by President Clinton on December
8, 1994, is consistent with EAI objectives by reducing tariff barriers between
signatory countries to promote free trade and, like NAFTA, provides for a
dispute resolution mechanism through the World Trade Organization. Uruguay
Round Agreement Act, Pub. L. No. 103-465, 108 Stat. 4809.
At the Summit of the Americas held in Miami on December 9-11, 1994,
the United States and 33 other Western Hemispheric countries pledged to create
a Free Trade Area of the Americas [hereinafter FTAA] that would extend from
Canada to Argentina. Andres Oppenheimer and Christopher Marquis, Summit's
Peak: Free Trade Zone, Alaska to Argentina, MIAMI HERALD, Dec. 11, 1994,
1995]
U.S. TRADE EMBARGO AGAINST CUBA
b.
105
Free Trade Agreements
The United States initiated negotiations on trade and
investment liberalization with many of the Latin American and
Caribbean nations during the Bush Administration." 4 The United
States has since been actively pursuing a policy of opening foreign
markets to U.S. goods through the promise of bilateral and
multilateral trade agreements. Agreements such as NAFTA and the
Caribbean Basin Initiative offer Latin American and Caribbean
countries reductions in tariffs and elimination of non-tariff trade
barriers to the export of their products to the United States, as well
as increased investment, imports and technology transfers from the
United States. An agreement of this nature between the United
States and Cuba would pave the way towards re-establishing the
special relationship that existed between the two countries before
the Cuban Revolution.
NAFTA is not the only, or even the first, multilateral trade
group in the Western Hemisphere; organizations such as
MERCOSUR, the Andean Group and CARICOM were established
prior to the date NAFTA went into effect. 1 5 Linking all of the
at 1A. A meeting was held in Denver on July 1-2, 1995 by the trade ministers
of all 34 countries to lay out a plan for the FTAA by the year 2005. The
Americas Drift Towards Free Trade, EcONOMIST, July 8, 1995, at 35. An FTAA
with both Cuba and the U.S. as members is currently impossible given Cuba's
economic and political conditions and present U.S. policy. Cuban participation
would be feasible if the U.S. embargo were lifted and Cuba met all the entry
requirements to the FTAA.
114. Authority to negotiate trade agreements is described in 19 U.S.C. §§ 1351,
1821 (1988).
115. In addition to NAFTA, there are five other multilateraltrade organizations
currently in existence in the western hemisphere: the Latin American Integration
Association [hereinafter ALADI], the Andean Group [hereinafter GRAN], the
Caribbean Common Market [hereinafter CARICOM], and the Southern Cone
Common Market [hereinafter MERCOSUR]. Intra-regional trade for the
aforementioned organizations grew at a rate of between 8.7% for CARICOM
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different groups was one of the major topics discussed at the
Summit of the Americas in December 1994, resulting in a pledge
to merge all of these regional trading blocs into one large free-trade
zone encompassing almost the entire hemisphere by 2005.116 In the
meantime, Canada, the United States, and Mexico are considering
the membership of Chile in the NAFTA under an accession clause
that allows entry by other nations, subject to the agreement of the
existing parties.
However, no eligibility criteria or application
mechanisms are described in the NAFTA agreement, and the
negotiations for the extension of NAFTA to Chile are being
hampered by U.S. Congressional opposition." 7
In the 104th Congress, supporters of Caribbean interests
introduced the "Caribbean Basin Trade Security Act," a bill that
would grant Caribbean products parity of treatment with Mexican
goods under NAFTA. This parity would last up to ten years after
enactment, allowing the Caribbean nations a transitional period to
members to a high of 25.3% for Andean Group members from 1990 to 1994.
Economic Integration in the Americas, INTER-AMERICAN DEVELOPMENT BANK
PERIODIC NOTE, July 1995, at 2. Membership in such an organization,
contingent on entry requirements, would greatly improve Cuba's access to
foreign markets and stimulate important sectors of its economy, most notably
sugar, tobacco and other agricultural products.
116. Summit's Peak, supra note 113, at IA.
117. Progress in Chile's accession to NAFTA has been delayed by differences
between President Clinton and the U.S. Congress over granting of Fast-Track
negotiating authority. InternationalTrade, Chile Accession to NAFTA Moving
Ahead, Despiteno Fast-Track, Officials Say, THE BUREAU OF NATIONAL AFFAIRS
DAILY REPORT FOR EXECUTIVES, Sept. 29, 1995, at 189A. The future of Chilean
membership may also depend on how long the fear of emerging market
investment in Latin America as a consequence of Mexico's financial crisis in
January 1995, lingers in NAFTA's member states. Latin America Savours the
TequilaAftertaste, ECONOMIST, May 20, 1995, at 41. In addition, there has been
speculation that Chile's lax environmental laws, and poor enforcement of those
in place, will make it difficult for Chile to enter NAFTA in its current form.
Chile's Lack of EnvironmentalLaws May Thwart Its Early Entry Into NAFTA,
BNA INTERNATIONAL TRADE DAILY, Oct. 3, 1995.
1995]
U.S. TRADE EMBARGO AGAINST CUBA
107
seek entry into NAFTA or negotiate separate free trade agreements
with the United States. Unless a NAFTA parity law is enacted,
NAFTA could undermine any trading preferences the Caribbean
countries might gain under the Caribbean Basin Initiative or other
similar laws directed at stimulating economic development in the
Caribbean. Legislation such as the NAFTA parity bill could afford
Cuba many of the benefits of NAFTA membership before Cuba
joins any multilateral trade agreements.118
c.
Investment Programs
The EAI established two vehicles for providing seed capital
in Latin American and Caribbean nations, overseen by the
Inter-American Development Bank's Multilateral Investment Fund
[hereinafter MIF] and Investment Sector Loan Program. The MIF
was established to stimulate the creation of micro-enterprises, small
businesses, and other forms of entrepreneurship, and to encourage
the adoption of sound economic policies in Latin America in order
to foster private investment in recipient countries. 9 Similarly, the
118. Caribbean Basin Trade Security Act, H.R. 553, 104th Cong., 1st Sess.
(1995). Opposition from the textile industry, fearing increased competition, has
stalled the bill in the House Ways and Means Committee. It is generally believed
that the legislation will remain stalled in the Ways and Means Committee in
1996, a Presidential election year. Scott West, Caribbean-Trade:Region Tries
to Recoup After Parity Blow, Inter Press Service, Sept. 18, 1995, available in
LEXIS, Nexis Library, INPRES File. See also ProspectsForParity Legislation
This Year Dim In House, Aide Says, THE BUREAU OF NATIONAL AFFAIRs
INTERNATIONAL TRADE REPORTER, Sept. 20, 1995.
119. In 1994 the MIF authorized 29 projects for a total of $64 million.
INTER-AMERICAN DEVELOPMENT BANK, 1994 ANNUAL REPORT 34 (1995).
Original authority for the investment funds is codified in 22 U.S.C. § 2430 (f)-
(g). Congress appropriated funds in Pub. L. 102-391 of October 6, 1992. The
U.S. has fallen behind in its contribution to the MIF, having provided only $90
million in FY 1993 and $75 million in FY 1994. UNiVERSITY OF NEW MEXICO,
CHRONICLE OF LATIN AMERICAN ECONOMIC AFFAIRS (Oct. 7, 1993).
Foreshadowing decreased MIF financing, total U.S. contributions for programs
108
YEARBOOK OF INTERNATIONAL LAW
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Investment Sector Loan Program makes loans to Latin American
and Caribbean governments that have implemented measures to
liberalize their economies."O
d.
Official Debt Reduction
The United States has reduced the debt obligations of seven
countries by $875 million under the EAI. 2 ' Foreign governments
incurred this official debt to the United States through nonconcessional loans by the Commodity Credit Corporation
[hereinafter CCC] and the Export-Import Bank [hereinafter
Eximbank], and concessional loans by the Agency for International
Development and the Department of Agriculture's food-aid
program. The EAI calls for the unilateral U.S. reduction of
concessional debt, as well as the use of debt-for-nature, debt-fordevelopment and debt-for-equity swaps to cancel debts. In these
swaps, the debtor nation is granted debt relief in return for
agreeing to commit local currency to projects bettering the
environment, social welfare and the economy. The U.S. Treasury's
Office of Debt Policy oversees reduction of concessional debt,
while the Eximbank and the CCC handle their debt swaps
themselves.
of the IDB fell from $76 million in 1994 to $50 million in 1995 and are further
expected to fall to $47 million in 1996. CONTRIBUTION TO THE INTER-AMERCAN
DEVELOPMENT BANK, BUDGET OF THE UNITED STATES GOVERNMENT FISCAL
YEAR 1996, APP., 77 (1995).
As of September 1995, the Inter-American Development Bank had made
120.
loans of over $1.1 billion under the Investment Sector Loan Program, and was
considering four additional loans worth $240 million dollars. INTER-AMERICAN
DEVELOPMENT BANK, PROJECTS IN THE PIPELINE BY SECTOR: PLANNING &
REFORM, IDB PROJECTS, 27, 29-30 (Aug./Sep. 1995).
121. See 22 U.S.C. § 2430(c) (1994).
U.S. TRADE EMBARGO AGAINST CUBA
1995]
109
While the debt reduction component of the EAI remains
nominally in effect, it has been effectively eliminated by Congress
through failure to appropriate funds for it starting in FY 1994.
2.
The Caribbean Basin Initiative
The Caribbean Basin Initiative consists of a multitude of
programs contained in the Caribbean Basin Economic Recovery Act
of 1983 [hereinafter CBI 1], as amended and supplemented in 1990
[hereinafter CBI I].*22 The CBI aims to foster development by
providing greater access to the U.S. market for many goods of
designated countries, stimulating U.S. investment in their
economies and encouraging liberalization.
Conditions for CBI qualification are set so as to promote
U.S. trade, foster anti-narcotics efforts, and advance U.S. foreign
policy objectives." z Over two dozen countries reap CBI benefits.
While CBI I expired in 1995, CBI II made permanent the
initiative's programs and preferences.
a.
Duty-free Entry into the United States of
Eligible Products from CBI Countries
One of the main benefits conferred on Caribbean countries
by the CBI is the duty-free entry into the United States of eligible
products from CBI members. Under Harmonized Trade Schedule
Item 9802, a wide variety of products from CBI countries receive
duty-free entry into the U.S. market, including most agricultural
and manufactured goods. Products excluded from duty-free
treatment but assembled in CBI countries from American
components receive reduced tariffs. Duty-free entry of sugar and
beef into the quota-regulated U.S. market is covered by special
rules. Detailed regulations address the question whether a product
122. The core of the CBI is codified in 19 U.S.C. §§ 2701- 2706 (1988).
123. Id. § 2702(b). .
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made with components from non-CBI countries 24has been
transformed sufficiently to receive duty-free treatment.'
b.
Guaranteed Access Levels for Apparel
For access to the protected U.S. textile and apparel market,
the CBI offers designated countries the opportunity to negotiate
Guaranteed Access Levels for textile and apparel products made of
U.S. formed and cut fabric.'2' This program provides incentive to
U.S. manufacturers to locate part of their operations in CBI
countries by combining the reduced costs of production in the lowwage Caribbean economies with a relatively high level of access to
the U.S. market.
c.
Bilateral Investment Treaties
As a precursor to the free trade agreements pursued under
the EAI, the CBI encouraged the negotiation of Bilateral Investment
Treaties [hereinafter BITs] with Caribbean governments. BITs
establish certain basic economic rights for U.S. investors in the
signatory country, such as protection against uncompensated
expropriation, and rights of profit repatriation. While ostensibly
two-way guarantees of investment rights, BITs are essentially
economic self-help measures for emerging economies, and typically
contain liberalizing reforms and incentives for attracting U.S. direct
investment.
124. Id. §§ 2701, 2703.
125. Authority to enter into such trade agreements with other countries is
granted in § 1821. Id.
1995]
U.S. TRADE EMBARGO AGAINST CUBA
d.
111
The Puerto Rican Caribbean Development
Program
One program of the Caribbean Basin Initiative that has been
particularly successful in providing development assistance has been
the Puerto Rican Caribbean Development Program [hereinafter
PRCDP]. The PRCDP has been instrumental in promoting trade
and investment throughout the Caribbean through four main
components: "Section 936 Funds," Production Sharing, Financing
Mechanisms, and Technical Assistance and Collaboration.
i.
Section 936 Funds
Of the four components of the PRCDP, Section 936 funds
have provided the largest amount of capital to finance projects to
CBI beneficiary countries. Under the auspices of the Internal
Revenue Code Section 936 tax incentive program, Section 936
Funds are created by the deposit of profits of U.S. corporate
subsidiaries operating in Puerto Rico in Puerto Rican banks. The
U.S. subsidiaries are exempt from corporate income tax under
Section 936, and accept a lower rate of return on their earnings--in
turn allowing local financial institutions to lend 936 Funds out at
in
reduced rates. Borrowers of Section 936 Funds for projects 126
costs.
finance
their
on
20%
to
up
Puerto Rico may thus save
Since 1987, Section 936 funds have also been available for
investment in active business assets and development projects in
eligible CBI-beneficiary countries.127
126. Of the more than $2 billion invested by the Caribbean Development
Program, over $1.2 billion has come from Section 936 Funds since 1987. To be
eligible for such loans a country must not only be a CBI beneficiary but a
signatory of a Tax Information Exchange Agreement (TIEA) with the United
States. BUREAU OF CARIBBEAN BASIN AFFAIRS, DEP'T OF STATE OF PUERTO
Rico, STATIsTICAL AND GRAPHIC SUMMARY: CARIBBEAN DEVELOPMENT
PROGRAM 1-4 (Mar. 1995) [hereinafter CARIBBEAN DEVELOPMENT PROGRAM].
127. 26 U.S.C. § 936(d)(4) (1994).
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Although the Section 936 Funds have become a valuable
development tool in the Caribbean Basin, the tax incentive program
is under intense attack. Many members of Congress wish to end
the plan altogether because of the benefits that corporations reap
from this tax shelter. 12 8 If Section 936 or equivalent program funds
were available at the time the trade embargo was lifted, and
assuming Cuba qualified for CBI benefits, such funds would
provide an important means of channeling private investment into
Cuba. 129
ii.
Production Sharing Operations
Through Production Sharing Operations, the Caribbean
Development Program allows firms to take advantage of low wages
in CBI beneficiary countries while maintaining technological and
capital intensive operations in Puerto Rico.
Through this
production dichotomy, sixty-four projects have created 14,500
direct jobs in the region and over 1,800 jobs in Puerto Rico. 3 '
128. Section 936 was amended in 1993 to place limits on the exemptions
available thereunder. Pub. L. No. 103-66, § 13227(a)-(b), 107 Stat. 489, 490
(codified as amended at Title 13 U.S.C. (1993)). There is legislation pending
before the 104th Congress that would eliminate Section 936 tax benefits. Tax
Fairness for Farmers, Ranchers, and Small Business Act, H.R. 1748, 104th
Cong., 1st. Sess. § 121(B)(a) (1995).
129. The Internal Revenue Code contains two additional sources of tax
incentives for U.S. enterprises wishing to become involved in CBI countries.
The CBI Convention Tourism Tax Credit provides a simplified deduction on
U.S. taxes for companies that hold business conventions in eligible CBI
countries. 26 U.S.C. § 274(h)(6) (1994). Also, classification of a company as
a "foreign sales corporation" enables a U.S. exporter to receive a U.S. tax credit
when it establishes a specialized sales subsidiary in a CBI country. Id. §§
921-927.
130. CARIBBEAN DEVELOPMENT
PROGRAM,
supra note 126, at 3.
1995]
iii.
U.S. TRADE EMBARGO AGAINST CUBA
113
Caribbean Basin Projects Financing Authority
In addition to financing through Section 936 Funds, the
PRCDP has created the Caribbean Basin Projects Financing
Authority [hereinafter CARIFA] and promoted the establishment of
the Caribbean Basin Partners for Progress [hereinafter CBPP] to
increase the availability of low cost loans to Caribbean investment
projects. CARIFA was created as an instrument of the Puerto
Rican government to provide financing through the issuance of
industrial revenue bonds to finance both large and small projects in
The CBPP, however, is a private
CBI eligible countries.
partnership comprised of 28 companies operating in Puerto Rico
which commit their own resources to a special Section 936 Fund for
small business loans."'
iv.
Technical Assistance Programs
The fourth area in which the PRCDP operates is in the field
of Technical Assistance and Collaboration. To further these ends
five Point Four Technical Seminars have been held to share
information on industrial, trade, finance, and service sector
development, regional economic integration, and hemispheric free
trade. In addition, training in the areas of industrial promotion and
support has been provided by Puerto Rico's Economic Development
Administration and scholarships to Caribbean students have been
32
granted.
131. Id. at 3-4. Since 1991, CARIFA has provided $650 million in financing
for twelve projects. Id. at 4. On a smaller scale, the CBPP has lent only $28
million for 52 small-scale projects that have created 5,500 jobs. CBI Lending
Creates Over 5,500 Jobs In the CaribbeanRegion, AP Worldstream, Jan. 10,
1995, available in LEXIS, NEXIS Library, AP File.
132. CARIBBEAN DEVELOPMENT
PROGRAM,
supra note 126, at 4.
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U.S. Government Procurement of CBICountry Goods
In 1986, the U.S. Trade Representative's office waived
certain restrictions on U.S. government procurement of foreign
products for CBI countries.133 Under the Trade Agreements Act of
1979, bids for U.S. government procurement contracts could not be
made by the seller of a foreign product unless the country of origin
had lowered its own restrictions on government procurement of
U.S. products. 134 The U.S. Trade Representative's action waived
this reciprocity requirement for CBI countries, thus enhancing the
ability of Caribbean countries to market their products to the U.S.
government, the largest single purchaser of goods and services in
the United States.
f.
Special Treatment in Enforcement of U.S.
Trade Laws
A subtle preference is given to CBI countries under a new
trade law enforcement provision enacted in CBI II. In an
investigation to determine if foreign trade practices violate antidumping and countervailing duty laws, imports from two or more
countries are usually aggregated to determine if material injury to
a U.S. industry has occurred. Under CBI II, imports from CBI
countries will no longer be aggregated with those of non-CBI
countries. 13 The possibility of small CBI countries being penalized
by countervailing duties principally brought on by the actions of
large, non-CBI countries is thus reduced.
133. 51 Fed. Reg. 6,964 (1986) (implementing Exec. Order. No. 12,260 of
Dec. 31, 1980).
134. 19 U.S.C. § 2511 (1995).
135. Id. § 1677(7)(c)(iv)(II).
U.S. TRADE EMBARGO AGAINST CUBA
1995]
3.
115
Other Economic Assistance Programs by Agency
By virtue of geography and recent history, the development
needs of the Latin American and Caribbean nations have received
special attention from the United States in the last decades. In
addition to the programs specially devoted to the region, the general
tools of U.S. trade promotion and development policy towards the
Third World remain at the disposal of Latin American and
Caribbean countries and could be utilized by Cuba if the U.S. trade
embargo were to end.
These programs and preferences have developed over a long
period of time and are not under a unified command. The
discussion here will group the most important of these programs
under each agency or organization charged with administering
them.
a.
U.S. Agency for International Development
As the mainstay of U.S. foreign assistance administration,
the U.S. Agency for International Development [hereinafter
USAID] conducts a vast array of development projects and
assistance programs from its field missions around the world.'36
USAID has drawn criticism for being wasteful and overbureaucratic. Perhaps as a result of this criticism, Congressional
funding for USAID development projects has been curtailed in
137
recent years.
136. Authority for USAID programs is codified throughout Chapter 32 of Title
22 of the United States Code, particularly in 22 U.S.C. §§ 2151 and 2346
(1994).
137. The Foreign Relations Revitalization Act of 1995 would abolish USAID
and transfer its functions to the Department of State. S. 908, 104th Cong., 1st
Sess. §§ 1401-1412 (1995).
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USAID administers three basic categories of non-emergency
assistance. ' The first, Economic Support Funds [hereinafter ESF],
are disbursed as ongoing "program assistance" to foreign
governments, and serve economic and political foreign policy
interests of the United States, in some cases related to military base
rights or access rights agreements. ESF assistance may finance a
country's balance of payments, fund specific government spending
programs, or otherwise assist in economic stabilization. Central
American countries are among the major ESF donees. Where
possible, USAID uses ESF assistance in conjunction with
Commodity Import Programs, in which USAID helps recipient
countries purchase of U.S. goods needed in their economies.' 39
The second variety of USAID funding, Special Assistance
Initiatives, are short-term, government-to-government injections of
aid, often into a multilateral pool. The Philippines and the former
communist countries of Eastern Europe are current Special
USAID also administers a
Assistance Initiative aid recipients."
special fund arising out of the Central American peace process: the
Central American Reconciliation Assistance, Demobilization and
Transition Fund. A similar special fund could be established to
assist Cuba.
138. This paper will not address USAID's role in advising developing countries
on economic policy and developing structural adjustment programs, nor USAID
spending for education, health, population planning and emergency humanitarian
relief. Many of these programs could and probably would need to be made
available to Cuba during the early phases of its transition to a free-market
society, to alleviate potentially catastrophic economic conditions warranting
significant emergency aid.
139. ESF payments to Latin America and the Caribbean amounted to almost
$173 million in 1994. Estimated amounts for 1995 and 1996 are $190.3 million
U.S. AGENCY FOR INTERNATIONAL
DEvELOPMENT, CONGRESSIONAL PRESENTATION SUMMARY TABLES FISCAL YEAR
and $117.8 million, respectively.
1996 22, 28, 35 (1995).
140. Special Assistance Initiative Payments by USAID are estimated as $1.07
billion in 1995 and $1.26 billion in 1996. Id. at 22, 35.
19951
U.S. TRADE EMBARGO AGAINST CUBA
117
The third and most heterogeneous type of USAID assistance,
called Development Assistance [hereinafter DA], funds discrete
development projects with U.S. and local partners. Examples of
uses of DA include:
(1) pre-feasibility and feasibility studies in commerciallyoriented energy development and research, in coordination with the
Department of Energy, and the Trade and Development Agency;
(2) agricultural research and land productivity projects;
(3) science and technology development programs;
(4) housing guaranty programs;
(5) capital Projects Fund for infrastructure development of
roads, irrigation, port facilities and free zone facilities;
(6) engineering, construction, and telecommunications
projects; and
(7) environmental protection programs.
In addition, DA funds are used for a broad category of
Private Sector Development projects. Coordinated by USAID's
Bureau for Private Enterprise and the Office of Trade and
Investment, these projects include, among others:
(1) privatization financing for U.S. businesses;
(2) providing capital for private sector development banks
and credit facilities to small- and medium-size businesses and
micro-enterprises;
(3) the Business and Development Network of regional
offices providing business information and services;
(4) training programs in investment, management and
marketing for nationals of beneficiary countries;
(5) helping beneficiary countries establish export and
investment promotion offices;
(6) the Private Sector Revolving Fund: offering loans, credit
guarantees and training for projects with substantial developmental
impact;
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(7) financial support for joint ventures in energy
development;
(8) the Forfeit Guarantee Program, rendering financing
assistance to U.S. companies wishing to export to AID-assisted
developing countries; and
(9) the Franchise Guarantee Program, providing loans to
to become franchisees of U.S.
indigenous entrepreneurs
14 1
corporations.
Through the Bureau for Private Enterprise and the Office of
Trade and Investment, USAID forges partnerships between U.S.
businesses and trade associations and the governments and private
sectors of beneficiary countries. USAID sponsors the International
Executive Service Corps of retired U.S. business executives, who
provide technical assistance to businesses and organizations in the
U.S. business is kept abreast of sales
developing world.
opportunities arising from USAID-related projects by a
computerized data base, the Procurement Information Access
System.
b.
Overseas Private Investment Corporation
The Overseas Private Investment Corporation [hereinafter
OPIC] is a self-financing federal corporation with the mission of
assisting U.S. investors in developing countries and emerging
economies.' OPIC's programs are available in over 140 countries
throughout the world. OPIC's assistance takes three principal
forms. Project financing makes available OPIC development funds
for direct loans and loan guarantees to U.S. investors in commercial
projects overseas. Direct loans range from $2 million to $30
141. USAID allocated over $267 million in DA funds to Latin America and the
Caribbean in 1994. Projeced Direct Assistance payments to the region are
expected to be over $383 million in 1995 and $385 in 1996. Id. at 22, 28, 35.
142. 22 U.S.C. § 2191 (1994).
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million, while loan guarantees can reach $200 million.143 The loans
are made at interest rates generally comparable to commercial rates,
but loan terms vary according to a project's assessed financial and
political risk. Investment insurance issued by OPIC protects U.S.
investments overseas against three types of political risks: currency
inconvertibility, expropriation and political violence. Finally,
investor services provided by OPIC include advisory services and
databases, investment missions, seminars and conferences. OPIC
staffs its various programs with regional specialists, including
specialists in Latin America.
c.
U.S. Department of Commerce
The Commerce Department plays an active role in
supporting development in Latin America through its numerous
programs of general trade promotion. Commerce is the hub of an
inter-agency task force, the Trade Promotion Coordinating
Committee, which links most of the federal government's export
promotion programs. This task force has a hotline for businesses
needing trade information and counseling and publishes a directory
Among these
of U.S. government resources for exporters.
resources is the National Trade Data Bank, a CD-ROM database on
export and trade opportunities. Similarly, Commerce's Office of
Export Trading Company Affairs publishes the "Export Yellow
Pages."
The International Trade Administration [hereinafter ITA] at
the Commerce Department organizes trade missions to foreign
countries focusing on particular U.S. industry or service sectors,
and missions to introduce U.S. companies to foreign markets. ITA
also arranges for U.S. participation in foreign trade fairs and
exhibitions. The Commerce Department's Foreign Commercial
143. OVERSEAS PRIVATE INVESTMENT CORP., 1994 ANNUAL REPORT 5 (1995).
In 1994, OPIC financed $324 million in projects and insured investments for
over $560 million in Latin America. Id. at 20-21.
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Service has officers in overseas posts scouting commercial
opportunities for U.S. investors and traders.
The Generalized System of Preferences [hereinafter GSP],
administered by the Commerce Department, permits developing
countries duty-free entry to the U.S. market on eligible products." 4
GSP expired on July 31, 1995, but Congress is considering
extending it until December 1997.145
d.
Department of Agriculture
A major form of U.S. foreign assistance to the developing
world is the Agricultural Trade Development Act of 1954. The
Food Aid Program established by this statute and administered by
the Department of Agriculture in coordination with USAID
provides concessional loans to purchase U.S. agricultural products
to meet the needs of developing countries.' 46
The Agriculture Department's Trade Assistance and
Promotion Office, and the Office of International Cooperation and
Development, offer information, databases, services and trade
missions to U.S. and foreign agricultural producers. The U.S.
Foreign Agricultural Service maintains 16 missions abroad, which
scout agricultural export opportunities for U.S. farmers.
e.
Export-Import Bank
The Export-Import Bank of the United States is an
independent federal agency that facilitates the export financing of
144. 19 U.S.C. §§ 2461, 2462 (1994); 15 C.F.R. § 2000 (1994).
145. Key House Commitee Endorses Five Year Extension of Super 301, Tim
BuREAU OF NATIONAL AFFAIRS INTERNATIONAL TRADE REPORTER 1561 (Sept.
20, 1995).
146. The Agricultural Trade Development Act of 1954 is codified at 7 U.S.C.
§ 1691 (1994). The International Development and Food Acts are codified
throughout 22 U.S.C. (1994).
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U.S. goods and services to credit worthy foreign buyers. 47 In 1991,
Eximbank programs financed over $1 billion in imports of U.S.
products to CBI countries. Eximbank's Export Credit Insurance
program protects U.S. exporters against buyer default, thus
allowing the exporter to offer more attractive credit terms. The
Eximbank Loan Program offers loan guarantees for U.S. exporters,
direct loans to foreign purchasers and intermediary loans to lenders
who then make loans to foreign purchasers. The Working Capital
Guarantee Program helps potential exporters obtain critical preexport financing from commercial lenders, providing repayment
protection for private sector loans to foreign purchasers of U.S.
goods. Eximbank provides special programs for small exporting
businesses, including enhanced protection for short-term sales.
f.
Small Business Administration
The Small Business Administration [hereinafter SBA] is an
independent federal agency charged with counseling, aiding and
protecting U.S. businesses that meet its size requirements.' 48 The
SBA's Office of International Trade provides information and
services to small businesses on exports and investments abroad.
Among the services provided is access to the Export Legal
Assistance Network, a nationwide group of international trade
attorneys who provide initial consultations to small businesses. The
SBA also has its own International Trade Loan program,
guaranteeing 85 % of loans up to $1 million.
g.
U.S. Trade and Development Agency
In addition to the trade and development programs already
mentioned, another independent federal agency, the U.S. Trade and
Development Agency [hereinafter TDA], is also charged with some
147. 12 U.S.C. § 635 (1994); 12 C.F.R. § 411 (1994).
148. 15 U.S.C. § 636 (1994).
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of the functions described above. 49 . The TDA hosts foreign
officials and businessmen in the United States on reverse trade
missions and provides grants for feasibility studies, consulting and
project planning for major projects in developing countries. The
projects involve high-priority sectors such as agribusiness, energy,
telecommunications and transportation. TDA's grants for these
projects range between $150,000 and $750,000. TDA also offers
Technical Assistance Grants to involve U.S. technical experts in
development projects underway.
h.
U.S. Department of Labor
The Bureau of International Labor Affairs of the U.S.
Department of Labor offers a variety of labor force development
and training programs upon the request of foreign governments.
Labor Department personnel, funded by USAID or the World
Bank, conduct these training programs in the host country to
develop small business entrepreneurial skills, increase labor and
management productivity, and improve labor-management relations
in the workplace.
i.
Peace Corps
The Peace Corps sends volunteers to developing countries
to initiate local self-help and development projects involving
agriculture, rural infrastructure, small business, health, education
and other developmental concerns. 50 Peace Corps volunteers have
access to small amounts of seed money to initiate their projects, but
otherwise must help their local contacts apply to traditional U.S.
and multilateral assistance agencies for funding.
149. 22 U.S.C. § 2421 (1994).
150. 22 U.S.C. § 2501 (1994).
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123
U.S. Information Agency
The U.S. Information Agency [hereinafter USIA] directs a
host of programs from its overseas missions to spread American
ideals of liberty, democracy and free enterprise.15 In addition,
USIA sponsors the International Visitors Program, which brings
foreign individuals or groups to the United States for month-long
visits. Visitors, who are usually foreign government and business
leaders, tour U.S. cities and meet their U.S. counterparts.
k.
Inter-American Foundation
The Inter-American Foundation [hereinafter IAF] is an
independent federal agency, which provides grants to local self-help
and development organizations throughout Latin America. 52
Established in 1969 as an experimental system of foreign-assistance
delivery, the IAF approves approximately $25 million in direct
grants each year to a wide variety of grassroots groups and nongovernmental organizations, cooperatives and micro-enterprises.
B.
Removing the Indirect Consequences of the Embargo
Even after the trade embargo against Cuba is lifted, further
steps will be needed to involve Cuba in the above described U.S.
assistance programs and preferences, which the rest of Latin
America and the Caribbean has enjoyed for many years.153 This
section summarizes the actions needed under present and proposed
151. 22 U.S.C. § 1461 (1994).
152. Id. § 290; 22 C.F.R. §§ 1001-07 (1995).
153. In addition to lifting the ban on assistance to Cuba contained in the Foreign
Assistance Act of 1961, 22 U.S.C. §§ 2151-2430 (1994), the above referenced
Section 403 of the Security and Development Act of 1985, Id. § 2227(a), would
have to be repealed, for it prohibits the use of the United States' share of
multilateral assistance programs for aid to Cuba. Id. § 2227(a).
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law to permit Cuban participation in the main programs and
preferences.
1.
The Enterprise for the Americas Initiative
General eligibility requirements for the benefits of the
Enterprise for the Americas Initiative are set out in 22 U.S.C. §
2430(b). To be eligible, a Latin American or Caribbean country
must have a government that is democratically elected, does not
support acts of international terrorism, cooperates in international
narcotics control matters, does not engage in systematic human
rights abuses, and is making strides towards economic
liberalization. 154 Determination of a country's eligibility for EAI
in
benefits is left to the President, who need only notify Congress
155
advance of his intention to designate a country as eligible.
Becoming EAI-eligible would allow Cuba to reduce,
pursuant to 22 U.S.C. § 2430(c), any official debt to the United
States government that has remained outstanding since the two
countries severed relations (provided that the debt reduction
program within the EAI was again functional and was applied to
funding
Cuba). Participation in EAI's two other pillars, investment
1 56
steps.
further
require
would
and trade liberalization,
In order for free trade agreements to be negotiated between
Cuba and the United States, the President would have to make a
number of determinations and notifications to Congress. First,
under the Foreign Trade Agreement Act, the President would have
to proclaim that Cuba is no longer dominated or controlled by the
154. Id. § 2430b(a).
155. Id. § 2430b(b).
156. The Inter-American Development Bank (IDB) administers the EAI's
Investment Sector Loan Program and the Multi-lateral Investment Fund. See
supra notes 119, 120, and accompanying text. Cuba would also need to apply
for and receive membership in the IDB, a process that could take a substantial
amount of time.
U.S. TRADE EMBARGO AGAINST CUBA
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world communist movement. 15 7 Alternativly, the President could
extend nondiscriminatory treatment by entering into a bilateral
commercial agreement with Cuba, determining that such agreement
is in the national interest, and properly notiflying Congress.' 58
2.
The Caribbean Basin Initiative
The extension to Cuba of the most important programs and
preferences of the Caribbean Basin Initiative will hinge on Cuba's
designation as a CBI "beneficiary country." Under present law,
Cuba cannot be designated as a beneficiary country because "the
President shall consider only" a specific list of twenty-seven
Caribbean Basin countries, not including Cuba. 59 Congress would
have to amend the Caribbean Basin Economic Recovery Act to
insert Cuba into the list of eligible designees. Even then, Cuba
must overcome several prohibitions and preconditions. Under 19
U.S.C. § 2702(b) paragraphs (1)-(7), the President shall not
designate a country a CBI beneficiary:
(1) If it is a communist country; (2) if it has
nationalized, expropriated or seized U.S. property,
or unduly infringed other property rights of U.S.
citizens; (3) if it has not respected arbitration awards
to U.S. parties; (4) if it affords preferential treatment
to the products of another developed country which
adversely affects U.S. commerce; (5) if its
government violates U.S. copyrights; (6) unless it
has agreed to extradite U.S. citizens; and (7) unless
it is taking steps to afford internationally recognized
worker rights.
157. 19 U.S.C. § 1351 (1988).
158. Id. §§ 2434, 2435(b).
159. Id. § 2702(b).
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However, the President can bypass the criteria of paragraphs
(1), (2), (3), (5), and (7) to designate one of the eligible countries
as a beneficiary if he "determines such designation will be in the
national economic or security interest of the United States," and
reports the rationale for such determination to Congress."
Designation as a CBI beneficiary would immediately provide
Cuba duty-free entry of designated products into the U.S. market.
Cuba would also stand to gain automatically if Congress passed a
bill granting CBI countries' products parity of treatment with
Mexican products under the enacted North American Free Trade
Agreement. 16 Special treatment for Cuban products in enforcement
of countervailing duty and anti-dumping laws would also go into
effect immediately.162 The U.S. Trade Representative could act
under Executive Order No. 1226063 to add Cuba to the list of CBI
countries for which U.S. government procurement restrictions were
waived in 1986.'64
Access to hundreds of millions of dollars in funds under
Internal Revenue Code Section 936 would have to await the signing
of a Tax Information Exchange Agreement between the United
States and Cuba. 65 Likewise, Cuba would not benefit from the CBI
Convention Tourism Tax Credit until the tax agreement is signed."6
Negotiation of tax treaties between the United States and foreign
countries is often a protracted process.
160. Id. § 2702(b).
161. See supra note 113.
162. 19 U.S.C. § 1677(7)(C)(iv)(II) (1994).
163. PURPA Notice, 48 Fed. Reg. 1,653 (1983).
164. Executive Order Notice, 51 Fed. Reg. 6,964 (1986).
165. 26 U.S.C. § 936(d)(4) (1994).
166. Id. § 274(h)(6).
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Negotiation of Guaranteed Access Levels for U.S. formed
and cut textiles and apparel completed in Cuba would be subject to
the same restrictions on U.S.-Cuban trade agreements noted in the
EAI discussion above.
3.
U.S. Agency
Programs
for
International
Development
The Economic Support Funds, Special Assistance Initiatives
and Development Assistance programs run by the U.S. Agency for
International Development are now unavailable to Cuba because of
the trade embargo statutes, particularly the Foreign Assistance Act
of 1961 which, as discussed above, prohibits U.S. assistance to
Cuba, most communist countries, and countries that have unjustly
expropriated U.S. property. Were the embargo to be lifted, USAID
would need to establish a field mission in Cuba and set in motion
its project review procedures. Most importantly, Congress would
need to appropriate the funds for USAID programs in Cuba.
4.
Overseas Private Investment Corporation
The authorizing act for the Overseas Private Investment
Corporation does not specifically restrict funding projects in
Cuba. 67 However, to be eligible for OPIC political risk insurance,
an investment must be in a country that has signed a commercial
agreement with the United States. Cuba and the United States
would need to enter into such an agreement.
5.
Generalized System of Preferences
The Generalized System of Preferences for developing
countries"' does not specifically identify Cuba as a country
167. 22 U.S.C. §§ 2191-2200 (1994).
168. 19 U.S.C. §§ 2461-2466 (1988).
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[Vol 3
excluded from duty-free treatment. However, it does provide that
the President shall not designate a country to be a GSP beneficiary
if it is a communist country, unless it is already receiving
nondiscriminatory treatment, is a member of GATT and the IMF,
169
and is not controlled by "international communism."
Additionally, the President cannot designate a country to be a GSP
beneficiary if the country has expropriated U.S. property or
infringed U.S. property rights without maling good-faith efforts to
redress the owners. 170 Most of the latter set of restrictions can be
waived if the President determines the GSP designation will be in
the national economic interest, and so reports to Congress.
6.
Agricultural Trade Development and Assistance
Food aid under the Agricultural Trade Development and
Assistance Act of 1954171 will become available to Cuba so long as
the President determines Cuba to be a "friendly" country, and not
one under the control of a foreign government running a world
communist movement. 172 Food aid under the International
Development and Food Acts 73 falls under the anti-Cuba restrictions
of the Foreign Assistance Act of 1961 and would be available if the
FAA's prohibitions were lifted.
7.
Export-Import Bank
Cuba is presently excluded by name from those countries
wherein Export-Import Bank guarantees, insurance or credit may be
169. Id. § 2462(b)(1).
170. Id. § 2462(b)(2)-(7).
171. 7 U.S.C. §§1691-1738 (1994).
172. Id. § 1703(d).
173. 22 U.S.C. §§ 2151-2430 (1994).
U.S. TRADE EMBARGO AGAINST CUBA
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used. Only a Presidential determination that Cuba has ceased to be
Marxist-Leninist, or that an Eximbank transaction involving Cuba
is in the national interest, can lift the prohibition. 74
8.
U.S. Assistance
Restrictions
Programs
Without
Specific
Beyond the general ban imposed by the embargo, there
appear to be no specific restrictions relating to Cuba on the
activities of the following agencies: the U.S. Trade and
Development Agency, 75 the U.S. Peace Corps, 176 the InterAmerican Foundation,' 77 the Small Business Administration' 78 and
the U.S. Information Agency.' 79
9.
Potential Effect of the LIBERTAD Act
Title II of the proposed LIBERTAD Act delineates a
program under which the United States would provide economic
assistance to Cuba "at such a time as the President determines that
a transition government or a democratically elected government is
in power" in Cuba. 180 The level of assistance to Cuba in the
LIBERTAD Act has been greatly modified since the bill's initial
introduction, and is currently quite different in the House and
174. 12 U.S.C. § 635(b) (1994).
175. 22 U.S.C. § 2421 (1994).
176. Id. § 2501 et seq.
177. Id. § 290.
178. 15 U.S.C. § 636 (1994).
179. 22 U.S.C. § 1461 (1994).
180. H.R. 927, 104th Cong., 1st Sess. § 202(a)(1) (1995).
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Senate versions of the Act. The most significant difference is that
the House bill as enacted does not authorize any specific assistance
to Cuba, but makes any such assistance in the future "subject to an
authorization of appropriations and subject to the availability of
appropriations."' The Senate version of the bill contains no such
limitations.
Another important difference between both versions of the
bill is that the Senate version seeks to address some of the concerns
raised by the Clinton Administration over perceived encroachment
by Congress of the President's constitutional authority to conduct
foreign policy.
The House version, however, leaves these
contentious provisions essentially intact. A telling example of the
differences between the Senate and House versions of the Act in
terms of deference to the President is found in the provisions
dealing with the lifting of the restrictions on travel and remittances
to Cuba that President Clinton imposed by Executive Order in
August 1994."2 The Senate draft does not prohibit lifting of these
restrictions even if the current Cuban government remains in
power, but expresses that "it is the sense of Congress that the
President should" require certain actions by Cuba before
reinstitution of general licenses for family remittances to Cuba and
family related travel. 3 By contrast, the House version directs:
"Only after a transition government in Cuba is in power, [such]
remittances ... as well as freedom to travel ... shall be
permitted. 11184
The conditions for the United States giving aid to Cuba also
181. Id. §§ 202(a)(2), 202(b)(2)(A), 202(b)(2)(B), 203(c)(1).
182. See supra note 50.
183. H.R. 927, 104th Cong., 1st Sess. § 2111 (1995) (S. Amdt. 2936).
184. H.R. 927, 104th Cong., 1st Sess., § 202(b)(2)(A)(iii) (1995). As
discussed in Section II.B.6, the conditions for the U.S. giving aid to Cuba also
reflect the different degrees of deference given to the President by the House and
Senate versions of the Act.
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reflect the different degrees of deference given to the President by
the House and Senate versions of the Act. Under the Senate draft,
a transition government must take four actions before aid can be
given to it: (1) legalize all political activity, (2) release all political
prisoners and allow for investigations of Cuban prisons by
approprite international human rights organizations, (3) abolish the
Department of State Security, Committees for the Defense of the
Revolution and Rapid Response Brigades, and (4) commit to
holding free and fair elections.
The LIBERTAD Act requires the President to develop a
plan for assistance to Cuba when a transition government is in
power, and when a democratically elected government is in
power. "5 Aid to a transition government under the House version
is generally limited to food, medicine, medical supplies and
equipment, and emergency energy supplies, plus assistance in
preparing the Cuban military forces to adjust to an appropriate role
Other types of assistance to a transition
in democracy.' 86
government would require that the President certify to Congress
that such assistance "is essential to the successful completion of the
transition to democracy."" The Senate version, on the other hand,
would provide to Cuba under a transition government "such food,
medicine, medical supplies and equipment, and other assistance as
may be necessary to meet the basic human needs of the Cuban
people." 88 The President, moreover, "should take such other steps
as will encourage renewed investment in Cuba to contribute to a
stable foundation for a democratically elected government in
89
Cuba. "1
185. Id. § 202(b)(1).
186. Id. § 202(b)(2)(A)(i).
187. Id. § 202(b)(2)(A)(ii).
188. Id. § 202(b)(2)(A)(i) (S. Amdt. 2936).
189. Id. § 202(b)(2)(A)(iii).
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Assistance to a democratically elected government would
include, in the House version: assistance under the Foreign
Assistance Act of 1961; assistance under the Agricultural Trade
Development and Assistance Act of 1952; financing, guarantees,
and other forms of assistance provided by the Export-Import Bank
of the United States; financial support as provided by OPIC;
assistance provided by the Trade and Development Agency; Peace
Corps programs; and "other appropriate assistance."'" The Senate
version of the LIBERTAD Act would not include aid under the
Foreign Assistance Act of 1961 or the Agricultural Trade
Development and Assistance Act of 1952, but would provide
"international narcotics control assistance."191
Both versions of the LIBERTAD Act direct that the
President shall take the necessary steps to seek and obtain the
agreement of other countries and of international financial
institutions and multilateral organizations to provide assistance to
a transition government and to a democratically elected government
in Cuba, and work with other countries and multilateral
organizations to coordinate all assistance programs.' 92 Moreover,
the Act directs the President to transmit to Congress, within 180
days of its enactment, a report describing a plan for carrying out the
assistance programs defined in the Act.1 93 In addition, the Act
requires that, upon making a determination that a democratically
elected government is in power in Cuba, the President submit a
report to Congress discussing, among others: the possibility of
granting Cuba most-favored-nation trade treatment; designating
Cuba as a beneficiary under the GSP program or under the
190. Id. § 202(b)(2)(B).
191. Id. § 202(b)(2)(B) (S. Amdt. 2936).
192. Id. § 202(e).
193. Id. § 202(g).
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U.S. TRADE EMBARGO AGAINST CUBA
133
conducting negotiations towards the
Caribbean Basin Initiative; and 194
accession of Cuba to NAFTA.
Even though not all-encompassing, Title II of the
LIBERTAD Act exemplifies the type of enabling legislation that
would be needed to speed the process of bringing Cuba within the
coverage of the main U.S. trade and economic assistance programs,
provided such aid could be granted with a minimum of political
conditions and red tape. 195
IV. CONCLUSIONS AND RECOMMENDATIONS
The U.S. trade embargo against Cuba rests on three
statutory sources: the Trading with the Enemy Act, the Foreign
Assistance Act, and the Cuban Democracy Act. The President has
the legal authority to remove the embargo, to the extent that it is
194. Id. § 202(h)(1).
195. The LIBERTAD Act is not the only proposed bill that defines what type
of emergency relief should be given to Cuba once the conditions set fort in
Section 1708(a) are satisfied. Id. Such definition is also found in the "Free and
Independent Cuba Assistance Act," H.R. 611, 104th Cong., 1st Sess. (1995),
upon which Title II of the LIBERTAD Act is based. See supra note 102.
In a recent speech, the Special Adviser to the President and the
Secretary of State for Cuba, Richard Nuccio, outlined what future U.S.
assistance to a transitional and democratic Cuba might consist of, given the
current prospect for further reductions in U.S. foreign assistance programs.
According to Nuccio, the United States could assist Cuba on a multilateral basis
with both international institutions, such as the World Bank and the United
Nations, and foreign countries interested in aiding Cuba. Assistance would come
in the areas of humanitarian aid, political reform, and economic reform.
Furthermore, foreign investment, with insurance for U.S. investors provided by
the Overseas Private Investment Corporation, lending by international financial
institutions, and joint ventures between the Cuban government and foreign or
domestic investors would be used to improve Cuba's decayed infrastructure.
Richard Nuccio, Address at the Shaw, Pittman, Potts & Trowbridge Workshop
on Foreign Investment in Cuba: Past, Present, and Future, on U.S. Assistance
to the Economic Reconstruction of a Transitional and Democratic Cuba 7 (Jan.
26, 1996). (Transcript available in Shaw, Pittman, Potts & Trowbridge Library).
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founded upon the TWEA and the FAA. Under those two statutes,
the President could lift the embargo unilaterally, at any time, and
without any preconditions, and would not be required to consult
Congress in order to do so. Political considerations, of course,
would probably dictate that the President work closely with
Congress before taking any such action.
The CDA presents a more complex situation. The CDA has
expanded the embargo in some respects (e.g., by prohibiting trade
with Cuba by third-country subsidiaries of U.S. corporations). The
statute has also defined a set of events in Cuba (specified in §
1708(a)) as preconditions to the President's ability to take steps to
lift the embargo. The President must make a determination that
those conditions have been satisfied (e.g., the accession to power in
Cuba of a government elected through free and fair elections
conducted under internationally recognized observers), and must
report his determination to Congress, before he can act on the
embargo. At that point, Congress can override the lifting of the
embargo if it disagrees with the President. Presumably, the
President's determination could also be challenged in the United
States federal courts. The proposed LIBERTAD Act imposess an
additional set of conditions for suspending, and eventually lifting,
the embargo.
One consequence of the imposition of a definite set of
conditions before the President is able to lift the embargo is the loss
of U.S. government flexibility to deal with developments in Cuba.
Unless Cuba's transition to democracy proceeds in an orderly
fashion that satisfies all requirements in § 1708(a) of the CDA and
the LIBERTAD Act (if enacted), the President may not be able to
lift the embargo for a significant period of time while events unfold
on the island. More likely than not, the transition in Cuba will not
follow the clean pattern predicted in the CDA, and additional
legislation will be needed to enable the President to remove all or
part of the embargo before the CDA's conditions are fulfilled.
Alternatively, Congress could enact legislation now that clarifies
that the President retains the authority, normally vested in the
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U.S. TRADE EMBARGO AGAINST CUBA
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President's office by the Constitution to conduct foreign affairs, to
decide on the timing and conditions for lifting the embargo.
Aside from these statutory issues, the President can rescind
at will most of the embargo regulations issued by various
government agencies under the President's delegated authority. In
particular, he is empowered to revoke the Cuban Assets Control
Regulations, which were issued under his TWEA authority. The
only exceptions to this Presidential power are those regulations
issued to implement direct provisions in a statute, such as the new
trade restrictions imposed by Section 1706 of the CDA.
In addition to authorizing the imposition of a trade embargo,
the FAA has cut off all U.S. economic aid to the present
government of Cuba. Moreover, no U.S. aid can be given to a
future government in Cuba until the President deems that giving
such aid is in the national interest of the United States, or until he
determines that Cuba has taken appropriate steps under international
law standards to provide restitution or compensation to U.S.
citizens whose property was confiscated by the Castro government.
The FAA's prohibition of giving aid to Cuba is directly or
indirectly responsible for Cuba's exclusion from numerous
economic assistance programs that the United States has developed
in the last thirty years, both for the benefit of countries in Latin
America and the Caribbean and to assist friendly nations
worldwide.
The FAA's total ban on aid to Cuba has been modified by
the CDA. Section 1705 of the CDA authorizes private donations
of food, medicines and medical supplies to Cuban nationals living
under the current Cuban regime, provided certain conditions are
met. Section 1707 allows the U.S. government to provide food,
medicines and medical supplies to a transition government in Cuba,
and Section 1708 authorizes the President to provide unspecified
emergency relief to a Cuban government elected in free and fair
elections. (The proposed LIBERTAD Act provides additional
definition of the types of aid that could be made available to Cuba.)
While the President has to make a series of determinations in order
to provide aid to Cuba under §§ 1707 and 1708, he does not have
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to determine that Cuba has taken appropriate steps to resolve the
U.S. citizen property claims. The CDA's failure to reassert this
condition leaves the continuing vitality of the claims resolution
requirement in the FAA open to question.
Missing from the CDA and other U.S. laws relating to Cuba
are any provisions to incorporate Cuba, once the embargo is lifted,
into the various economic aid programs sponsored by the U.S.
government or in which the United States participates. Title II of
the proposed LIBERTAD Act directs the President to take steps to
bring a democratic Cuba within the coverage of some U.S.
sponsored economic aid programs. This bill, or another like it,
needs to be enacted before the Cuban transition begins so that the
U.S. government agencies will be prepared to take expeditious
action to admit Cuba into all applicable assistance programs. Such
action will need to include in certain cases the enactment of
additional, agency-specific legislation.
Many other U.S. statutes contain provisions that impede
trade with, or assistance to Cuba. A systematic search for those
provisions should be undertaken now so they can be identified and
removed either by Executive action or by legislation when
conditions in Cuba warrant it.
Finally, the Federal government should establish, perhaps
under the overall leadership of the Department of State, an
interagency task force to identify the problems that will be posed by
Cuba's transition to a free-market democratic society, develop a
unified strategy to assist Cuba in resolving those problems, and
draft the necessary implementing laws and regulations. This task
force is needed now, because its scope of work is significant and
there are indications that the transition process is taking place,
albeit slowly, in Cuba already.